-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, W2N7BiHZPfd98ppo2iMeUbDKMzFHEsT73tC5VG2arQ9VAYGr0Zv/8DKi3XkjSTtp ZTzQaYqrOr7O8aHiiNWjvQ== 0000950129-97-002462.txt : 19970620 0000950129-97-002462.hdr.sgml : 19970620 ACCESSION NUMBER: 0000950129-97-002462 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19970619 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MENS WEARHOUSE INC CENTRAL INDEX KEY: 0000884217 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-APPAREL & ACCESSORY STORES [5600] IRS NUMBER: 741790172 STATE OF INCORPORATION: TX FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-29539 FILM NUMBER: 97626089 BUSINESS ADDRESS: STREET 1: 5803 GLENMONT DR CITY: HOUSTON STATE: TX ZIP: 77081 BUSINESS PHONE: 7132957200 MAIL ADDRESS: STREET 1: 5083 GLENMONT DR CITY: HOUSTON STATE: TX ZIP: 77081 S-3 1 THE MEN'S WEARHOUSE, INC. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1997 REGISTRATION NUMBER 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 THE MEN'S WEARHOUSE, INC. (Exact name of registrant as specified in its charter) TEXAS (State or other jurisdiction of incorporation or organization) 74-1790172 (I.R.S. Employer Identification No.) 5803 GLENMONT DRIVE HOUSTON, TEXAS 77081 (713) 295-7200 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) DAVID H. EDWAB 40650 ENCYCLOPEDIA CIRCLE FREMONT, CALIFORNIA 94538 (510) 657-9821 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: MICHAEL W. CONLON KATHERINE M. SEABORN FULBRIGHT & JAWORSKI L.L.P. GARDERE & WYNNE, L.L.P. 801 PENNSYLVANIA AVENUE, N.W. 1601 ELM STREET WASHINGTON, D.C. 20004 DALLAS, TEXAS 75201 (202) 662-4660 (214) 999-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
================================================================================================================== AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------ Common Stock, $.01 par value.... 2,990,000 $33.75 $100,912,500 $30,580 ==================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c) of the Securities Act of 1933 and based upon the average of the high and low sale prices of Common Stock as reported on the Nasdaq National Market on June 17, 1997. --------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED JUNE 19, 1997 PROSPECTUS 2,600,000 SHARES [MEN'S WEARHOUSE LOGO] COMMON STOCK ------------------------------ Of the 2,600,000 shares of Common Stock offered, 1,000,000 shares are being sold by the Company and 1,600,000 shares are being sold by the Selling Shareholders. The Company will not receive any of the proceeds from the sale of shares by the Selling Shareholders. See "Selling Shareholders". The Common Stock is quoted on the Nasdaq National Market under the symbol "SUIT". On June 18, 1997, the last reported sale price for the Common Stock as quoted by the Nasdaq National Market was $32.00 per share. See "Price Range of Common Stock". ------------------------------ FOR INFORMATION CONCERNING CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK FACTORS" BEGINNING ON PAGE 7. ------------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
======================================================================================================================= UNDERWRITING PROCEEDS TO PRICE TO DISCOUNTS AND PROCEEDS TO SELLING PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS - ----------------------------------------------------------------------------------------------------------------------- Per Share.............................. $ $ $ $ - ----------------------------------------------------------------------------------------------------------------------- Total(3)............................... $ $ $ $ =======================================================================================================================
(1) The Company and the Selling Shareholders have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting". (2) Before deducting expenses payable by the Company, estimated at $ . (3) The Selling Shareholders have granted the Underwriters a 30-day option to purchase up to an additional 390,000 shares of Common Stock on the same terms and conditions as set forth above solely to cover over-allotments, if any. If such option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions, Proceeds to Company and Proceeds to Selling Shareholders will be $ , $ , $ and $ , respectively. See "Underwriting". ------------------------------ The shares are offered, subject to prior sale when, as and if delivered to and accepted by the Underwriters and subject to certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the shares of Common Stock will be made on or about , 1997, at the offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167. ------------------------------ BEAR, STEARNS & CO. INC. MORGAN STANLEY DEAN WITTER PAINEWEBBER INCORPORATED ROBERTSON, STEPHENS & COMPANY , 1997 3 CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS AND THE IMPOSITION OF PENALTY BIDS. SEE "UNDERWRITING." IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SEE "UNDERWRITING". --------------------- AVAILABLE INFORMATION The Company is subject to the informational requirements of the Exchange Act, and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by the Company with the Commission can be inspected at the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the Regional Offices of the Commission at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, New York, New York 10048. Copies of such material can also be obtained from the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains an Internet Website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. Such reports, proxy statements and other information filed by the Company may also be inspected at the offices of the Nasdaq National Market ("Nasdaq"), 1735 K Street, N.W., Washington, D.C., on which the Company's Common Stock is listed. The Company has filed with the Commission a Registration Statement on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Common Stock offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain items of which are contained in exhibits to the Registration Statement as permitted by the rules and regulations of the Commission. For further information with respect to the Company and the Common Stock offered hereby, reference is made to the Registration Statement, including the exhibits thereto, which may be inspected without charge at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of the Commission, and copies of which may be obtained from the Commission at prescribed rates. Statements made in this Prospectus concerning the contents of any document referred to herein are not necessarily complete. With respect to each such document filed with the Commission as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company's (i) Annual Report on Form 10-K for the year ended February 1, 1997 (the "Annual Report"), including the consolidated financial statements of the Company and the report thereon by Deloitte & Touche LLP contained in the Annual Report, (ii) Quarterly Report on Form 10-Q for the quarter ended May 3, 1997, and (iii) description of its Common Stock appearing in the Company's Registration Statement on Form 8-A dated April 3, 1993, are hereby incorporated by reference herein. All documents filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Common Stock pursuant hereto shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of the filing of such documents. Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference in this Prospectus shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained in this Prospectus or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company undertakes to provide without charge to each person to whom a copy of this Prospectus has been delivered, upon the written or oral request of any such person, a copy of any or all of the documents incorporated by reference herein, other than the exhibits to such documents, unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates. Written or oral requests for such copies should be directed to: The Men's Wearhouse, Inc., 40650 Encyclopedia Circle, Fremont, California 94538, Attention: Investor Relations, telephone number (510) 657-9821. --------------------- The Men's Wearhouse(R) is a registered trademark and service mark of the Company. 2 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere or incorporated by reference in this Prospectus. For a discussion of certain factors that should be considered by prospective purchasers of the Common Stock offered hereby, see "Risk Factors". As used herein, the term "Men's Wearhouse" refers to The Men's Wearhouse, Inc. and its wholly owned subsidiaries, exclusive of Value Priced Clothing, Inc. and its wholly owned subsidiary, Value Priced Clothing II, Inc. (collectively referred to as "VPC"). The term the "Company" refers to The Men's Wearhouse, Inc. and its wholly owned subsidiaries including VPC. Additionally, the terminology a "Men's Wearhouse store" or a "traditional store" refers to a traditional Men's Wearhouse store, while a "C&R store" refers to the 17 stores operated by VPC in Southern California and a "NAL store" refers to the six stores operated by VPC in Texas and Louisiana. THE COMPANY The Company is one of the country's largest off-price specialty retailers of men's tailored business attire. The Company's primary operating strategy is to provide value to its customers by offering quality merchandise at consistent, everyday low prices and a superior level of customer service. In the Men's Wearhouse stores, the Company targets middle and upper income men between 24 and 54 years of age and offers a broad selection of designer, brand name and private label merchandise at prices it believes are typically 20% to 30% below traditional department and specialty store prices. The Company considers its merchandise, which includes suits, sport coats, slacks, outerwear, dress shirts, shoes and accessories, conservative. By concentrating on tailored business attire, a category of men's clothing characterized by infrequent and more predictable fashion changes, the Company believes it is not as exposed to trends typical of more fashion-forward apparel retailers, where markdowns and promotional pricing are more prevalent. Men's Wearhouse distinguishes itself from other retailers of men's tailored clothing by combining its value-oriented pricing with a strong commitment to customer service. Men's Wearhouse offers a shopping experience designed to cater to customers who generally prefer to limit the time they spend shopping for men's business attire. The sales personnel at the traditional stores are trained as clothing consultants so that they understand the relative attributes of the Company's merchandise and are able to respond to a particular customer's budget and taste. Every Men's Wearhouse store provides on-site tailoring to facilitate timely alterations, free pressing for the life of the garment purchased at Men's Wearhouse stores and free re-alteration of clothing purchased and previously tailored at Men's Wearhouse stores. The Company believes that each of these programs provides customer convenience and increases the likelihood of current and future sales. The Company's expansion strategy includes opening additional traditional stores in new and existing markets and increasing its net sales and profitability in existing markets. The Company anticipates that the addition of these new stores will be the primary source of its future growth. Some of these new stores may be acquired from local menswear retailers in both new and existing markets. During fiscal 1996, the Company opened 50 new stores and entered 10 new markets. At present, the Company plans to open approximately 50 new Men's Wearhouse stores during 1997 (17 of which were open as of June 16, 1997), approximately one-half of which will be in new markets, and to continue its expansion in subsequent years. The Company, through VPC, has initiated an additional expansion strategy which targets customers who emphasize price to a greater extent than the Company's traditional customer. In January 1997, the Company acquired 17 stores operating under the name "C&R Clothiers", and in May 1997, acquired six stores operating under the name "NAL". Both the C&R stores and the NAL stores target the more price sensitive customer. See "Recent Developments". As a result of continuing consolidation of the men's tailored clothing industry, the Company has been and expects to continue to be presented with opportunities within the industry, such as increased direct sourcing of merchandise, acquisitions of menswear retailers and acquisitions or licensing of national brands or designer labels. See "Possible Acquisition". 3 5 The Company has experienced significant growth in recent years both from new store openings and increased sales in existing stores. The Company opened its first store in Houston, Texas in 1973 and, as of June 16, 1997, operated 344 Men's Wearhouse stores in 34 states, 17 C&R stores in Southern California, five NAL stores in Texas and one NAL store in Louisiana. Net sales have increased from $170.0 million in 1992 to $483.5 million in 1996, a compound annual growth rate of approximately 30%. During this same period, net earnings increased from $5.9 million in 1992 to $21.1 million in 1996, a compound annual growth rate of 37.5%. The Company commenced operations in 1973 as a partnership and was incorporated as The Men's Wearhouse, Inc. under the laws of Texas in May 1974. Its principal executive offices are located at 5803 Glenmont Drive, Houston, Texas 77081 (telephone number 713/295-7200), and at 40650 Encyclopedia Circle, Fremont, California 94538 (telephone number 510/657-9821). RECENT DEVELOPMENTS In January 1997, the Company, through VPC, acquired certain of the assets of C&R Clothiers, Inc. ("C&R"), a privately-held retailer of men's tailored clothing stores operating in Southern California. Pursuant to this acquisition, VPC acquired 17 C&R stores in Southern California and C&R's existing inventory and entered into a new lease for C&R's distribution center in Culver City, California. The C&R stores operate seven days a week under the C&R name. In May 1997, VPC acquired certain of the assets, including inventory, of Walter Pye's Men's Shops, Inc. which included four stores in the greater Houston area and one store in each of San Antonio, Texas and New Orleans, Louisiana. Walter Pye's Men's Shops, Inc. operated these six stores on a weekend-only basis under the name "NAL". Both the C&R stores and the NAL stores target the more price sensitive customer. See "Recent Developments". POSSIBLE ACQUISITION From time to time, the Company has been in discussions with certain creditors and representatives of certain creditors (the "Interested Parties") of Today's Man, Inc., a Delaware corporation ("Today's Man"), concerning the Company's interest in a possible acquisition of more than a majority of the stores operated by Today's Man, including related inventory. Today's Man operates 25 menswear superstores (averaging approximately 25,000 square feet) specializing in tailored clothing, furnishings and accessories and sportswear in the greater Philadelphia, Washington, D.C. and New York City markets. On February 2, 1996, Today's Man and certain of its subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") seeking to reorganize under Chapter 11 of the United States Bankruptcy Code. The discussions with the Interested Parties have not included the management of Today's Man, and the Company anticipates that any understanding between the Company and the Interested Parties will be opposed by such management. The Company believes, based on limited information, that the purchase price for the assets in which the Company has an interest may be between $70 and $90 million, depending on the level of inventory at the time of closing. Due to the complexity of the situation and the conflicting goals of the several parties involved, there is a significant likelihood that the Company may not be able to acquire the assets of Today's Man. See "Possible Acquisition." If the Company were to acquire the assets of Today's Man, the Company would have an immediate and significant retail presence in the greater Philadelphia and New York City markets. The Company's internal expansion plans include entering these markets over the next few years. The Company already has commenced site location selections and leasing activities in the Philadelphia area. 4 6 THE OFFERING Common Stock offered by the Company......................... 1,000,000 shares Common Stock offered by the Selling Shareholders............ 1,600,000 shares Total............................................. 2,600,000 shares Common Stock to be outstanding after this Offering.......... 22,026,576 shares(1) Use of proceeds............................................. To fund continued expansion, whether through the possible acquisition of Today's Man or otherwise, to upgrade management information and technology systems and to construct an additional distribution facility and for other general corporate purposes. See "Use of Proceeds". Nasdaq Symbol............................................... SUIT
- --------------- (1) Does not include 855,645 shares issuable upon the exercise of outstanding stock options, of which options for 278,281 shares are exercisable as of the date of this Prospectus. 5 7 SUMMARY CONSOLIDATED FINANCIAL AND OPERATING INFORMATION The following summary consolidated financial information is derived from and should be read in conjunction with the Company's consolidated financial statements incorporated by reference herein. References herein to years are to the Company's 52- or 53-week fiscal year, which ends on the Saturday nearest January 31 in the following calendar year. For example, references to "1996" mean the fiscal year ended February 1, 1997. All fiscal years for which financial information is included in this Prospectus had 52 weeks, except for 1995 which had 53 weeks. References herein to "three months" are to the 13-week periods ended May 4, 1996 and May 3, 1997.
YEAR THREE MONTHS --------------------------------------------------------- --------------------- 1992 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- --------- --------- (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AND PER SQUARE FOOT DATA) STATEMENT OF EARNINGS INFORMATION: Net sales................................... $169,977 $240,394 $317,127 $406,343 $483,547 $103,697 $130,621 Gross margin................................ 63,976 91,766 121,878 157,615 188,366 38,962 48,433 Operating income............................ 10,803 15,818 22,375 30,606 38,134 5,631 7,362 Net earnings................................ 5,870 8,739 12,108 16,508 21,143 3,109 4,016 Net earnings per share of common stock(1)... $ 0.35 $ 0.48 $ 0.63 $ 0.82 $ 1.00 $ 0.15 $ 0.19 Weighted average shares outstanding(1)(2)... 16,532 18,138 19,163 20,226 21,193 21,212 21,248 OPERATING INFORMATION: Percentage increase in comparable store sales(3).................................. 6.2% 17.2% 8.4% 6.8% 3.9% 7.6% 1.3% Average square footage -- all stores(4)..... 4,287 4,374 4,426 4,583 4,780 4,632 4,787 Average sales per square foot of selling space(5).................................. $ 381 $ 409 $ 419 $ 425 $ 420 $ 95 $ 94 Number of stores: Open at beginning of the period........... 113 143 183 231 278 278 345 Opened during the period.................. 31 40 48 48 50 7 15 C&R stores acquired during the period..... -- -- -- -- 17 -- -- Closed during the period.................. 1 -- -- 1 -- -- 1 -------- -------- -------- -------- -------- -------- -------- Open at the end of the period............. 143 183 231 278 345 285 359 Capital expenditures(6)..................... $ 9,345 $ 11,461 $ 23,736 $ 22,538 $ 26,222 $ 4,745 $ 6,399
MAY 3, 1997 JAN. 30, JAN. 29, JAN. 28, FEB. 3, FEB. 1, ------------------------- 1993 1994 1995 1996 1997 ACTUAL AS ADJUSTED(8) -------- -------- -------- -------- -------- -------- -------------- BALANCE SHEET INFORMATION: Working capital......................... $ 28,289 $ 42,689 $ 68,078 $ 88,798 $136,837 $137,310 $167,510 Total assets............................ 78,745 112,176 160,494 204,105 295,478 311,590 341,790 Long-term debt and capital leases(7).... 8,909 10,790 24,575 4,250 57,500 57,500 57,500 Shareholders' equity.................... 38,448 57,867 84,944 136,961 159,129 164,262 194,462
- --------------- (1) Adjusted to give effect to a 2.5541-for-one stock split effected on March 23, 1992, a 50% stock dividend effected on August 6, 1993, and a 50% stock dividend effected on November 15, 1995. (2) Includes common shares and common share equivalents. (3) Comparable store sales data is calculated by excluding the net sales of a store for any month of one period if the store was not open throughout the same month of the prior period. (4) Average square footage -- all stores is calculated by dividing the total square footage for all stores (excluding the Company's outlet stores) open at the end of the period by the number of stores open at the end of such period. Excluding the 17 C&R stores acquired on January 17, 1997, the average square footage per store at the end of 1996 was 4,683 and at May 3, 1997 was 4,694. (5) Average sales per square foot of selling space is calculated by dividing total selling square footage for all stores (excluding the Company's outlet stores) open the entire period into total sales for those stores. Selling square footage does not include space for tailoring operations and storage. (6) Excludes additions to capital lease property. (7) February 1, 1997 and May 3, 1997 balances represent the 5 1/4% Convertible Subordinated Notes Due 2003. (8) Gives effect to the sale by the Company of the Common Stock offered hereby and the application of the estimated net proceeds therefrom. See "Use of Proceeds". 6 8 RISK FACTORS Prior to making an investment decision, prospective investors should consider carefully all of the information set forth in this Prospectus and, in particular, should evaluate the following risk factors. EXPANSION STRATEGY A significant portion of the Company's growth has resulted from and will continue to be dependent upon the addition of new Men's Wearhouse stores and the increased sales volume and profitability from such stores. In addition, the Company's expansion plans for its traditional stores within the next few years includes entry into the highly competitive greater Philadelphia and New York City markets. When entering new markets, the Company will be required to obtain suitable store sites, hire personnel and establish distribution methods in geographic areas in which it has no prior experience. In addition, the Company must advertise the Men's Wearhouse name and its distinguishing characteristics in new markets where the Company may not be known. There can be no assurance that the Company will be able to open and operate new Men's Wearhouse stores on a timely and profitable basis, and the costs associated with opening such stores may adversely affect the Company's profitability. The Company's expansion strategy may also be adversely affected by then existing conditions in the commercial real estate market. In addition to its growth through the addition of new traditional stores, the Company has experienced comparable store sales increases in each of the past five years, including 6.8% and 3.9% increases for 1995 and 1996, respectively, and a 2.2% increase for the first four months of fiscal year 1997. There can be no assurance that the Company will experience similar rates of comparable store sales growth in future periods. With the acquisition of the 17 C&R stores and the six NAL stores by VPC, the Company started a new men's apparel division targeting the more price sensitive clothing customers. While the Company intends to evaluate the C&R stores and the NAL stores with a view toward expanding this division, there can be no assurance that these stores or any further expansion into the more price sensitive market will ultimately be successful. POSSIBLE ACQUISITION The large store format used by Today's Man differs from the Company's traditional merchandising approach. Accordingly, the acquisition and operation of the Today's Man stores would involve risks different from opening and operating the Company's traditional stores with respect to which the Company has extensive experience. In addition, the acquisition of Today's Man would be significantly larger than any other acquisition made by the Company. There can be no assurance that the anticipated benefits of such acquisition, if completed, would be realized or that the integration of the operations of the Today's Man's stores with those of the Company would be successful or that any anticipated cost savings from such integration would be realized. In addition, such an acquisition may involve a number of special risks, such as diversion of management's attention from ongoing operations, retention of personnel and failure of acquired businesses to maintain or increase profitability, some or all of which could have a material adverse effect on the Company's financial condition and results of operations. See "Possible Acquisition". SEASONALITY AND GENERAL ECONOMIC CONDITIONS The Company's business is seasonal as are most retail businesses. Historically, over 30% of the Company's net sales and approximately 50% of its net earnings have been generated during the last three months of its fiscal year, which includes the Christmas selling season. As with other retail businesses, the Company's operations may be adversely affected by unfavorable local, regional or national economic developments which result in reduced consumer spending in the markets served by its stores. There can be no assurance that a prolonged economic downturn would not have a material adverse impact on the Company. DECLINING UNIT SALES OF MEN'S TAILORED CLOTHING Industry sources indicate that unit sales in the men's tailored clothing market segment generally have declined over many years. The Company believes that the decline in unit sales can be attributed primarily to men allocating a lower portion of their disposable income to tailored clothing and a relaxation of dress codes 7 9 by certain employers. The Company believes that this decrease in unit sales has contributed, and will continue to contribute, to a consolidation among retailers of men's tailored clothing. Although to date the Company has been able to take advantage of this industry consolidation to expand its market share, there can be no assurance that the Company will continue to be able to expand its sales volume or maintain its profitability within what the Company believes is a consolidating segment of the retailing industry. COMPETITION The men's tailored clothing market is highly fragmented, and the Company faces intense competition for customers, for access to quality merchandise and for suitable store locations. The Company competes primarily with specialty men's clothing stores, traditional department stores, other off-price retailers and manufacturer-owned and independently-owned outlet stores. Several of these competitors are units of large department store chains that have substantially greater financial, marketing and other resources than the Company, and there can be no assurance that the Company will be able to compete successfully with them in the future. See "Business -- Competition". POSSIBLE VOLATILITY OF STOCK PRICE The market price for shares of the Common Stock has varied significantly and may be volatile depending on news announcements and changes in general market conditions. See "Price Range of Common Stock". In particular, news announcements regarding quarterly or annual results of operations, monthly comparable store sales, acquisitions, competitive developments or litigation impacting the Company may cause significant fluctuations in the Company's stock price. CONTROL OF THE COMPANY After this offering, the executive officers and directors of the Company will own approximately 28.5% (26.7% if the over-allotment option is exercised in full) of the outstanding Common Stock. As a result, such shareholders could control the outcome of matters requiring a vote of the shareholders, including the election of directors and the approval of any sale of assets, merger or consolidation. See "Selling Shareholders". RELIANCE ON KEY PERSONNEL The Company believes that its continued success will depend to a significant extent upon the continued efforts of George Zimmer, Chairman of the Board and Chief Executive Officer of the Company and the Company's primary advertising spokesman. The loss of Mr. Zimmer's services could have a material adverse effect upon the Company. The Company's continued success and achievement of its expansion objectives are also dependent upon its ability to attract and retain other qualified employees as it expands. PREFERRED STOCK AUTHORIZED FOR ISSUANCE The Company has available for issuance 2,000,000 shares of preferred stock, $.01 par value per share, which the Board of Directors of the Company is authorized to issue, in one or more series, without any further action on the part of shareholders. In the event the Company issues a series of preferred stock in the future that has preference over the Common Stock with respect to the payment of dividends and upon the Company's liquidation, dissolution or winding up, the rights of the holders of the Common Stock offered may be adversely affected. See "Description of Capital Stock -- Preferred Stock". FORWARD-LOOKING STATEMENTS Certain statements made in this Prospectus and in other public filings and releases by the Company contain "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risk and uncertainty. These forward-looking statements may include, but are not limited to, future capital expenditures, acquisitions (including the amount and nature thereof), the use of proceeds of this Offering of Common Stock, future sales, earnings, margins, costs, number and costs of store openings, demand for men's clothing, market trends in the retail men's clothing business, currency fluctuations, inflation and 8 10 various economic and business trends. Forward-looking statements may be made by management orally or in writing, including but not limited to, this Prospectus and other of the Company's filings with the Securities and Exchange Commission under the Exchange Act and the Securities Act. Prospective investors are cautioned that any such statements are not guarantees of future performance and that actual results and trends in the future may differ materially depending on a variety of factors including, but not limited to, domestic economic activity and inflation, the Company's successful execution of internal operating plans and new store and new market expansion plans, performance issues with key suppliers, foreign currency fluctuations, government export and import policies and legal proceedings. Future results will also be dependent upon the ability of the Company to continue to identify and complete successful expansions and penetrations into existing and new markets and its ability to integrate such expansions with the Company's existing operations. RECENT DEVELOPMENTS In November 1996, VPC was organized as a wholly owned subsidiary of the Company for the purpose of acquiring certain of the assets of C&R Clothiers, Inc., a privately-held retailer of men's tailored clothing stores operating in Southern California. On January 17, 1997, VPC acquired 17 C&R stores in Southern California and C&R's existing inventory and entered into a new lease for C&R's distribution center in Culver City, California. The C&R stores average approximately 6,600 square feet and operate seven days a week. In May 1997, VPC acquired certain of the assets of Walter Pye's Men's Shops, Inc. ("Walter Pye's"), which included four stores in the greater Houston area and one store in each of San Antonio, Texas and New Orleans, Louisiana, and related inventory. Walter Pye's operated these six stores on a weekend-only basis (Friday, Saturday and Sunday) under the name "NAL". The Company intends to continue to operate these stores, which average approximately 14,300 square feet, on a weekend-only basis as part of the Company's division selling apparel to the more price sensitive clothing customer. Further, the Company intends to convert its existing outlet stores in Atlanta and Dallas, which are similar in size to the NAL Stores, to the NAL format. With these acquisitions, the Company launched a new men's apparel division targeting the more price sensitive clothing customer who requires less customer service. The C&R stores and the NAL stores carry less branded merchandise and more private label merchandise, are price promotional and provide fewer services than the traditional stores. Merchandise, consisting of suits, sports coats, slacks, dress shirts, shoes, accessories, casual wear and formal wear, is generally offered at prices that management believes are 30% to 50% below traditional department store and specialty store regular prices. In the case of suits, prices generally range from $99 to $199. See "Business -- VPC Operations". During March 1997, the Company, through its wholly owned subsidiary, Value Priced Liquidators, Inc., formed a joint venture with Buxbaum, Ginsberg & Associates, Inc. and entered into an asset purchase and license agreement to acquire and liquidate certain of the assets of Kuppenheimer's Men's Clothiers, a chain of 42 men's clothing stores. Under the agreement, the Company acquired the Kuppenheimer trade name, customer lists, labels, and other proprietary data as well as certain property and equipment and assumed leases on two Kuppenheimer stores. The Kuppenheimer's going-out-of-business sale was concluded on June 1, 1997, and all of the Kuppenheimer stores have been closed. The Company's participation in the joint venture's activities will not have a significant impact on the Company's results of operations. 9 11 POSSIBLE ACQUISITION From time to time, the Company has been in discussions with the Interested Parties concerning the Company's interest in a possible acquisition of more than a majority of the stores operated by Today's Man, including related inventory. Today's Man operates 25 menswear superstores (averaging approximately 25,000 square feet) specializing in tailored clothing, furnishings and accessories and sportswear in the greater Philadelphia, Washington, D.C. and New York City markets. On February 2, 1996, Today's Man and certain of its subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware seeking to reorganize under Chapter 11 of the United States Bankruptcy Code. The Company believes, based on limited information, that the purchase price for the assets in which the Company has an interest may be between $70 and $90 million depending on the level of inventory at the time of closing. The discussions with the Interested Parties have not included management of Today's Man, and the Company anticipates that any understanding between the Company and the Interested Parties will be opposed by such management. Due to the complexity of the situation and the conflicting goals of the several parties involved, there is a significant likelihood that the Company may not be able to acquire the assets of Today's Man. If the Company were to acquire the assets of Today's Man, the Company would have an immediate and significant retail presence in the greater Philadelphia and New York City markets. If the Company does not acquire the assets of Today's Man, the Company's internal expansion plans include entering the greater Philadelphia and New York City markets over the next few years. The Company has already commenced site location selections and leasing activities in the Philadelphia area. The following description of Today's Man is based on information included in its Annual Report on Form 10-K for the fiscal year ended February 1, 1997 and Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 1997 filed with the Securities and Exchange Commission (File No. 0-20234). The Company has not independently verified the information. Today's Man's common stock is publicly traded and Today's Man files reports and other documents with the Commission on a regular basis. Interested persons can obtain copies of these reports and other documents from the Commission. In addition, Today's Man files reports and other documents with the Bankruptcy Court, some of which are publicly available from the Bankruptcy Court. Today's Man operates 25 superstores, of which 12 stores are located in the greater New York City area, nine stores are located in the Philadelphia area and four stores are located in the Washington, D.C. area. The Today's Man stores range in size from approximately 18,000 sq. ft. to 34,000 sq. ft. See "Risk Factors -- Possible Acquisition." Approximately three quarters of the area of each store is devoted to selling space, with the remaining used for tailoring, check-out, storage and administrative and employee areas. Today's Man stores are usually located in a shopping center or freestanding building near a major shopping mall. For its fiscal year ended February 1, 1997, Today's Man reported net sales of $204,042,000, operating income of $3,536,000 and a net loss of $5,811,000, including a charge of $8,848,000 for reorganization items. However, during the 1996 fiscal year, Today's Man closed ten stores in the greater Chicago, New York and Washington, D.C. markets. Accordingly, its operating results for fiscal year 1996 include the results from stores which are now closed. For the fiscal quarter ended May 3, 1997, Today's Man reported net sales of $43,929,000, operating income of $869,000 and net income of $159,000, after the effect of a charge of $654,000 for reorganization items. 10 12 USE OF PROCEEDS The net proceeds to the Company from the sale of Common Stock offered hereby are estimated, based on an assumed public offering price of $32.00 per share, to be approximately $30.2 million after deducting underwriting discounts and commissions and expenses of the offering payable by the Company. The Company currently intends to use the proceeds of this offering together with cash generated by operations and borrowings under the Company's credit agreement to fund its continued expansion, including expansion into new markets, whether through the acquisition of Today's Man or otherwise, to upgrade its management information and technology systems, to construct an additional distribution facility, to expand the VPC concept, to minimize indebtedness under the Company's credit agreement and for other general corporate purposes. See "Possible Acquisition" and "Financing and Capital Resources". As of June 16, 1997, there was no indebtedness outstanding under the Company's credit agreement; however, as the Company increases inventory levels for the peak selling season, the Company anticipates borrowing under its credit agreement. Pending such uses, the Company intends to invest such net proceeds in short-term income-producing investments such as investment grade commercial paper, government securities or money market funds. The Company will not receive any of the proceeds from the sale of shares of Common Stock by the Selling Shareholders. PRICE RANGE OF COMMON STOCK The Common Stock is quoted on Nasdaq under the symbol "SUIT". The following table sets forth, on a per share basis for the periods indicated, the high and low sale prices per share for the Common Stock as reported by Nasdaq. The prices set forth below for periods prior to November 16, 1995 have been adjusted to give retroactive effect to the 50% stock dividend paid on that date.
HIGH LOW ------ ------ Fiscal Year ended February 3, 1996 First quarter............................................. $17.09 $12.83 Second quarter............................................ 23.83 15.50 Third quarter............................................. 28.83 19.17 Fourth quarter............................................ 30.25 20.75 Fiscal Year ended February 1, 1997 First quarter............................................. $38.50 $25.50 Second quarter............................................ 37.00 17.00 Third quarter............................................. 27.00 18.25 Fourth quarter............................................ 28.50 16.25 Fiscal Year ended January 31, 1998 First quarter............................................. $31.00 $23.00 Second quarter (through June 18, 1997).................... 35.25 25.13
The closing sale price of the Common Stock on June 18, 1997, as reported on Nasdaq, was $32.00. As of June 16, 1997, the Company had 280 record holders and approximately 4,500 beneficial holders of Common Stock. DIVIDEND POLICY The Company has not paid any cash dividends on its Common Stock and for the foreseeable future intends to retain all its earnings for the future operation and expansion of its business. The Company's credit agreement prohibits the payment of cash dividends on the Common Stock. See "Financing and Capital Resources". 11 13 CAPITALIZATION The following table sets forth the capitalization of the Company as of May 3, 1997, and as adjusted to give effect to the sale by the Company of 1,000,000 shares of Common Stock offered hereby and the application of the estimated net proceeds therefrom as described under "Use of Proceeds". The table set forth below should be read in conjunction with the consolidated financial statements and notes thereto of the Company incorporated by reference herein.
AS HISTORICAL ADJUSTED ---------- -------- (IN THOUSANDS) Current maturities of capital lease obligations............. $ 284 $ 284 ======== ======== Long-term debt.............................................. 57,500 57,500 -------- -------- Shareholders' equity: Preferred stock, $.01 par value, 2,000,000 shares authorized; none issued................................ -- -- Common stock, $.01 par value, 50,000,000 shares authorized; 21,010,671 shares issued (22,010,671 shares as adjusted)(1)........................................ 210 220 Additional paid-in capital................................ 79,061 109,251 Retained earnings......................................... 85,332 85,332 Treasury common stock, 53,735 shares at cost.............. (341) (341) -------- -------- Total shareholders' equity........................ 164,262 194,462 -------- -------- Total capitalization.............................. $221,762 $251,962 ======== ========
- --------------- (1) Excludes 838,760 shares subject to options outstanding on May 3, 1997, at a weighted average option price of $18.50 per share. 12 14 SELECTED CONSOLIDATED FINANCIAL INFORMATION The following selected statement of earnings and balance sheet information for the fiscal years indicated has been derived from the Company's audited consolidated financial statements. The Company's consolidated financial statements as of February 3, 1996 and February 1, 1997 and for each of the three years in the period ended February 1, 1997 were audited by Deloitte & Touche LLP, independent auditors, whose report thereon is incorporated by reference herein. The comparable selected information for the three months ended May 4, 1996 and May 3, 1997 has been derived from the Company's unaudited consolidated financial statements, which, in the opinion of management, include all adjustments (consisting only of normal recurring entries) that the Company considers necessary for a fair presentation of such data. The information set forth below should be read in conjunction with the consolidated financial statements and notes thereto of the Company incorporated by reference herein. References herein to years are to the Company's 52- or 53-week fiscal year, which ends on the Saturday nearest January 31 in the following calendar year. For example, references to "1996" mean the fiscal year ended February 1, 1997. All fiscal years for which financial information is included in this Prospectus had 52 weeks, except for 1995 which had 53 weeks. The unaudited results for the three months ended May 3, 1997 are not indicative of the results expected for the full 1997 fiscal year.
YEAR THREE MONTHS --------------------------------------------------------- --------------------- 1992 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- --------- --------- (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AND PER SQUARE FOOT DATA) STATEMENT OF EARNINGS INFORMATION: Net sales.................................. $169,977 $240,394 $317,127 $406,343 $483,547 $103,697 $130,621 Gross margin............................... 63,976 91,766 121,878 157,615 188,366 38,962 48,433 Operating income........................... 10,803 15,818 22,375 30,606 38,134 5,631 7,362 Net earnings............................... 5,870 8,739 12,108 16,508 21,143 3,109 4,016 Net earnings per share of common stock(1)................................. $ 0.35 $ 0.48 $ 0.63 $ 0.82 $ 1.00 $ 0.15 $ 0.19 Weighted average shares outstanding(1)(2)........................ 16,532 18,138 19,163 20,226 21,193 21,212 21,248 OPERATING INFORMATION: Percentage increase in comparable store sales(3)................................. 6.2% 17.2% 8.4% 6.8% 3.9% 7.6% 1.3% Average square footage--all stores(4)...... 4,287 4,374 4,426 4,583 4,780 4,632 4,787 Average sales per square foot of selling space(5)................................. $ 381 $ 409 $ 419 $ 425 $ 420 $ 95 $ 94 Number of stores: Open at beginning of the period.......... 113 143 183 231 278 278 345 Opened during the period................. 31 40 48 48 50 7 15 C&R stores acquired during the period.... -- -- -- -- 17 -- -- Closed during the period................. 1 -- -- 1 -- -- 1 -------- -------- -------- -------- -------- -------- -------- Open at the end of the period............ 143 183 231 278 345 285 359 Capital expenditures(6).................... $ 9,345 $ 11,461 $ 23,736 $ 22,538 $ 26,222 $ 4,745 $ 6,399
MAY 3, 1997 JAN. 30, JAN. 29, JAN. 28, FEB. 3, FEB. 1, ------------------------- 1993 1994 1995 1996 1997 ACTUAL AS ADJUSTED(8) -------- -------- -------- -------- -------- -------- -------------- BALANCE SHEET INFORMATION: Working capital............................. $ 28,289 $ 42,689 $ 68,078 $ 88,798 $136,837 $137,310 $167,510 Total assets................................ 78,745 112,176 160,494 204,105 295,478 311,590 341,790 Long-term debt and capital leases(7)........ 8,909 10,790 24,575 4,250 57,500 57,500 57,500 Shareholders' equity........................ 38,448 57,867 84,944 136,961 159,129 164,262 194,462
- --------------- (1) Adjusted to give effect to a 2.5541-for-one stock split effected on March 23, 1992, a 50% stock dividend effected on August 6, 1993, and a 50% stock dividend effected on November 15, 1995. (2) Includes common shares and common share equivalents. (3) Comparable store sales data is calculated by excluding the net sales of a store for any month of one period if the store was not open throughout the same month of the prior period. (4) Average square footage -- all stores is calculated by dividing the total square footage for all stores (excluding the Company's outlet stores) open at the end of the period by the number of stores open at the end of such period. Excluding the 17 C&R stores acquired on January 17, 1997, the average square footage per store at the end of 1996 was 4,683 and at May 3, 1997 was 4,694. (5) Average sales per square foot of selling space is calculated by dividing total selling square footage for all stores (excluding the Company's outlet stores) open the entire period into total sales for those stores. Selling square footage does not include space for tailoring operations and storage. (6) Excludes additions to capital lease property. (7) February 1, 1997 and May 3, 1997 balances represent the 5 1/4% Convertible Subordinated Notes Due 2003. (8) Gives effect to the sale by the Company of the Common Stock offered hereby and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization". 13 15 FINANCING AND CAPITAL RESOURCES In March 1996, the Company issued $57.5 million of 5 1/4% Convertible Subordinated Notes due 2003 (the "Notes"). The Notes are convertible into Common Stock at a conversion price of $34.125 per share. A portion of the net proceeds from the Notes was used to repay outstanding indebtedness under the then existing credit agreement and the balance has been invested in new stores, the acquisition of C&R and Walter Pye's, licenses, trademarks, short-term interest bearing securities or otherwise used to minimize borrowings under the then existing credit agreement. Interest on the Notes is payable semi-annually on March 1 and September 1 of each year. On June 2, 1997, the Company entered into a new revolving credit agreement with its bank group (the "Credit Agreement"). The Credit Agreement provides for borrowings of up to $125 million through April 30, 2002. As of June 16, 1997, there was no indebtedness outstanding under the Credit Agreement. Advances under the Credit Agreement bear interest at a rate per annum equal to, at the Company's option, (i) the agent's prime rate or (ii) the reserve adjusted LIBOR rate plus an interest rate margin varying between .875% to 1.375%. The Credit Agreement provides for fees applicable to unused commitments of .125% to .275%. The Credit Agreement contains certain restrictive and financial covenants, including a requirement to maintain a minimum amount of Consolidated Net Worth (as defined in the Credit Agreement). The Company is also required to maintain certain debt to cash flow, cash flow coverage and current ratios and must keep its average store inventories below certain specified amounts. In addition, the Credit Agreement limits additional indebtedness, creation of liens, Restricted Payments (as defined in the Credit Agreement) and Investments (as defined in the Credit Agreement). The Credit Agreement also prohibits payment of cash dividends on the Common Stock of the Company. The Credit Agreement permits, with certain limitations, the Company to merge or consolidate with another company, sell or dispose of its property, make acquisitions, issue options or enter into transactions with affiliates. The Company is in compliance with the covenants in the Credit Agreement. The Company has obtained a waiver from its bank group of the limitations in the Credit Agreement with respect to the transaction described under "Possible Acquisition". The Company's primary sources of working capital are cash flow from operations, proceeds from the sale of the Common Stock discussed above, and borrowings under the Credit Agreement. Historically, the Company's working capital has been at its lowest level in January and February, and has increased through November as inventory buildup is financed with both short-term and long-term borrowings in preparation for the fourth quarter selling season. The Company's primary cash requirements are to finance working capital increases for its peak selling season and fund capital expenditure requirements anticipated to be between approximately $25 million and $30 million for 1997. This amount includes the anticipated costs of opening approximately 50 new stores in 1997 at an expected average cost per store of between approximately $240,000 to $250,000 (excluding telecommunications and point-of-sale equipment and inventory). The balance of the capital expenditures for 1997 will be used for telecommunications, point-of-sale and other computer software, for store remodeling and expansion, distribution and real estate. In June 1997, the Company commenced construction of additional distribution facilities of approximately 150,000 square feet on a six acre tract adjacent to its current distribution facility in Houston. Including the cost of the land (which was purchased for $700,000 in 1996), fixtures and equipment, these new distribution facilities are estimated to cost approximately $7.5 million and are expected to be completed by or shortly after the end of the current fiscal year. As further described under "Business -- Management Information and Telecommunications Systems", the Company is currently conducting an evaluation of the computer hardware and software needs necessary to productively manage its expected future business activities. Based on the current plan, it is expected that related capital expenditures will approximate $12 million to $17 million over the next 18 to 24 months. The Company anticipates that each of the approximately 50 new stores that it expects to open in 1997 will require, on average, an initial inventory costing approximately $500,000 (subject to the same seasonal patterns affecting inventory at all stores), which will be funded by the Company's revolving credit facility, 14 16 trade credit and cash from operations. The actual amount of future capital expenditures and inventory purchases will depend in part on the number of new stores opened and the terms on which new stores are leased. As indicated under "Possible Acquisition", the Today's Man stores are considerably larger than the average size of the traditional stores. Consequently, if the Company is successful in completing this acquisition, the cost the Company will be required to incur in average inventory per store will be significantly more than that required for its traditional stores. If the Company is not successful in completing this acquisition, the stores it ultimately opens in the markets served by Today's Man will likely be larger than the typical traditional store and, consequently, the per store construction costs and the average inventory for the stores in these markets also will likely be larger than the typical traditional store. The Company anticipates that its existing cash and cash flow from operations, supplemented by borrowings under the Credit Agreement, will be sufficient to fund its planned store openings, other capital expenditures and operating cash requirements for at least the next 12 months. 15 17 BUSINESS The Company's net sales have increased from $170.0 million in 1992 to $483.5 million in 1996. As of June 16, 1997, the Company operated 367 stores in 34 states, including 17 C&R stores in Southern California and six NAL stores in Texas and Louisiana, with approximately 41% of its locations in California and Texas. At present, the Company plans to open approximately 50 new Men's Wearhouse stores in 1997 and continue its store expansion in subsequent years. See "Possible Acquisition", "Financing and Capital Resources", "-- Business Strategy" and "-- Expansion Strategy". INDUSTRY OVERVIEW Men's Wearhouse has developed its approach to merchandising and marketing by considering the buying patterns and perceived needs of its targeted customer. The Company believes that most men consider a suit to be a major purchase, and, accordingly, they generally shop for suits relatively infrequently and on an as needed basis. The Company believes that it appeals to this type of customer by offering a combination of service and value in Men's Wearhouse stores that may not be consistently available at other stores selling men's tailored business attire. The Company also believes that the primary shopping options available to men looking for business attire include specialty men's clothing stores, traditional department stores, off-price retailers and manufacturer-owned and independently-owned outlet stores. Although specialty stores may carry higher quality and more expensive designer and brand name suits, sport coats and slacks than Men's Wearhouse, the breadth of selection may be limited. These stores usually offer the customer a high degree of personal service. However, the merchandise at specialty stores tends to be more expensive. In addition, these stores often lack the buying power enjoyed by apparel chains that purchase in volume, and tailoring costs are generally included in the price of each garment irrespective of the amount of tailoring needed. Department stores can offer greater breadth of selection and may offer lower prices at certain times than specialty men's clothing stores. However, the Company considers department stores to be less focused than the Company because their men's departments often allocate relatively less selling space and sales personnel to tailored business attire. In addition, menswear departments in department stores tend to be highly promotional, and prices on a particular piece of clothing can vary greatly throughout a selling season. Department stores may have centralized tailoring facilities that are not located in the store, which tends to delay the tailoring process and the ultimate delivery of product to the customer. Many off-price retailers and outlet stores offer low prices, but the quality and depth of their menswear selection may be inconsistent. As with department stores, there may be less focus on men's business attire since some off-price retailers may also carry women's and children's merchandise and certain outlet stores also carry sportswear. Customer service in these stores is viewed by the Company as limited, with patrons often being required to help themselves in locating the desired style, color and size, and in some instances return policies are inflexible. Men's Wearhouse has always attempted to distinguish itself by providing what it believes to be the best features of each competing alternative. BUSINESS STRATEGY The Company, through Men's Wearhouse, seeks to be the premier off-price specialty retailer of men's tailored business attire, catering to value-seeking customers by offering a broad selection of quality apparel at everyday low prices and by providing superior customer service in the Men's Wearhouse stores. Management believes that the Company's growth is the result of its ability to distinguish itself from its competitors and that its distinguishing features include merchandise selection, customer service, expansion strategy and corporate culture. 16 18 Merchandising. The Company strives to associate Men's Wearhouse with consistent product availability and value. Accordingly, in each Men's Wearhouse store, the Company offers a broad selection of designer, brand name and private label clothing, including a consistent stock of core items (such as navy blazers, tuxedos and basic suits). Men's Wearhouse stores consistently provide recognizable, quality merchandise at prices, in the case of suits, ranging generally from $199 to $499. The Company does not purchase significant quantities of merchandise overruns or closeouts. Customer Service. In Men's Wearhouse stores, the Company attempts to provide a level of service that is superior in its industry and differentiates Men's Wearhouse from its competition. A "do whatever it takes" attitude toward customer service is encouraged throughout the Company, with multiple programs designed to provide customer convenience, promote customer satisfaction and loyalty and increase the likelihood of current and future sales. Expansion Strategy. The Company's expansion strategy is to continue to open stores in new markets, to open additional stores in existing markets and to increase sales and profitability of existing stores. The Company anticipates that the addition of new traditional stores will be the primary source of its future expansion. The Company also anticipates further expansion in the more price sensitive market through its VPC division. The Company may also seek to expand through acquisition opportunities that may arise out of the continued consolidation of the men's tailored clothing industry. See "Possible Acquisition" and "-- VPC Operations". Company Culture. The Company recognizes that even the best strategies can be unsuccessful if implemented without the employees' commitment. The Company takes great pride in its corporate culture and believes its culture has promoted a heightened sense of employee commitment and loyalty to the Company's long-term goal of continued profitable growth. MERCHANDISING Men's Wearhouse stores offer a broad selection of designer, brand name and private label men's business attire, including a consistent stock of core items (such as navy blazers, tuxedos and basic suits) and considers its merchandise conservative. Although basic styles are emphasized, each season's merchandise does reflect current fabric and color trends, and a small percentage of inventory, accessories in particular, is usually more fashion oriented. The broad merchandise selection creates increased sales opportunities by permitting a customer to purchase substantially all of his tailored wardrobe and accessory requirements, including shoes, at a Men's Wearhouse store. Within its tailored clothing, Men's Wearhouse offers an assortment of styles from a variety of manufacturers and maintains a broad selection of fabrics and colors. The Company believes that the depth of selection it offers at Men's Wearhouse provides it with an advantage over most of its competitors. In 1995, Men's Wearhouse expanded its inventory mix to include "business casual" merchandise designed to meet increased demand for such product resulting from the trend toward more relaxed dress codes in the workplace. The added merchandise consists of tailored and non-tailored clothing which complements the existing product mix and provides opportunity for enhanced sales without significant inventory risk. The expanded inventory includes, among other things, more sports coats, casual slacks, knits and woven sports shirts, sweaters and casual shoes. The Company believes its Men's Wearhouse stores differ from most other off-price retailers in that the Company does not purchase significant quantities of merchandise overruns or close-outs. Men's Wearhouse stores provide recognizable quality merchandise at consistent prices that assist the customer in identifying the value available at Men's Wearhouse. The Company believes that the merchandise at the Men's Wearhouse stores is generally offered 20% to 30% below traditional department and specialty store regular prices. Men's Wearhouse affixes a ticket to each item, which displays the Men's Wearhouse selling price alongside the price the Company regards as the regular retail price of the item. At the check-out counter, the customer's receipt reflects the savings from what the Company considers the regular retail price. By targeting men's tailored business attire, a category of men's clothing characterized by infrequent and more predictable fashion changes, the Company believes it is not as exposed to trends typical of more fashion- 17 19 forward apparel retailers. This allows Men's Wearhouse stores to carry basic merchandise over to the following season and reduces the need for markdowns; for example, a navy blazer or gray business suit may be carried over to the next season. Men's Wearhouse has a once-a-year sale after Christmas that has typically lasted until the fourth week in January, during which prices on many items are reduced 20% to 50% off the everyday low prices. This sale reduces stock at year-end and prepares for the arrival of the new season's merchandise. During 1994, 1995 and 1996, 77%, 74% and 72%, respectively, of the Company's net sales were attributable to tailored clothing (suits, sport coats and slacks), and 23%, 26% and 28%, respectively, were attributable to accessories and other items. Customers may pay for merchandise with cash, check or nationally recognized credit cards. Credit card sales were 65% of net sales in 1994, 67% in 1995 and 68% in 1996. CUSTOMER SERVICE AND MARKETING Men's Wearhouse sales personnel are trained as clothing consultants to provide customers with assistance and advice on their apparel needs, including product style, color coordination, fabric and garment fit. Clothing consultants attend an intensive training program at the Company's training facility in Fremont, California, which is further supplemented with weekly store meetings, periodic merchandise meetings, and frequent interaction with multi-unit managers and merchandise managers. Men's Wearhouse encourages its clothing consultants to be friendly and knowledgeable and to promptly greet each customer entering the store. The consultants are encouraged to offer guidance to the customer at each stage of the decision-making process, making every effort to earn the customer's confidence and to create a professional relationship that will continue beyond the initial visit. Clothing consultants are also encouraged to contact customers after the purchase or pick-up of tailored clothing to determine whether customers are satisfied with their purchases and, if necessary, to take corrective action. Store personnel have full authority to respond to customer complaints and reasonable requests, including the approval of returns, exchanges, refunds, re-alterations and other special requests, all of which the Company believes helps promote customer satisfaction and loyalty. Each Men's Wearhouse store provides on-site tailoring services to facilitate timely alterations at a reasonable cost to customers. Tailored clothing purchased at a Men's Wearhouse store will be pressed and re-altered (if the alterations were performed at a Men's Wearhouse store) free of charge for the life of the garment. Because management believes that men prefer direct and easy store access, the Company attempts to locate Men's Wearhouse stores in neighborhood strip and specialty retail centers or in free standing buildings to enable customers to park near the entrance of the store. The Company's annual advertising expenditures, which were $23.2 million, $27.4 million and $31.0 million in 1994, 1995 and 1996, respectively, are significant. However, the Company believes that once it attracts prospective customers, the experience of shopping in its stores will be the primary factor encouraging subsequent visits. Men's Wearhouse advertises principally on television and radio, which it considers the most effective means of attracting and reaching potential customers, and its advertising campaign is designed to reinforce its image of providing value and customer service. "I guarantee it" is a long standing phrase associated with Men's Wearhouse and its advertising campaign. In the advertisements, the Company's Chief Executive Officer and co-founder guarantees customer satisfaction with the apparel purchased, the quality of tailoring and the total shopping experience. VPC OPERATIONS As described under "Recent Developments", VPC acquired 17 C&R stores in Southern California in January 1997, and, in May 1997, VPC acquired six NAL stores in Texas and Louisiana. With these acquisitions, the Company launched a new men's apparel division targeting the more price sensitive clothing customer. Although distinctly different in format (the C&R stores were and continue to be operated seven days a week and have an average store size of 6,600 square feet and the NAL stores were and continue to be 18 20 operated on a weekend-only basis and have an average store size of 14,300 square feet), each targets the more price sensitive clothing customer who requires less customer service. The C&R stores and the NAL stores carry less branded merchandise and more private label merchandise than traditional stores and are price promotional. Merchandise, consisting of suits, sports coats, slacks, dress shirts, shoes, accessories, casual wear and formal wear, is generally offered at prices that management believes are 30% to 50% below traditional department store and specialty store regular prices. In the case of suits, prices generally range from $99 to $199. The Company intends to evaluate the relative advantages of the larger versus smaller store size and the seven day versus weekend-only operations with a view towards expanding the operations of this division across the United States as it has Men's Wearhouse stores. However, the Company does not expect the ultimate number of stores operated by this division to approach the number of Men's Wearhouse stores. PURCHASING AND DISTRIBUTION The Company purchases merchandise from approximately 180 vendors. In 1996, no vendor accounted for 10% or more of purchases. Management does not believe that the loss of any vendor would significantly impact the Company. While the Company has no material long-term contracts with its vendors, the Company believes that it has developed an excellent relationship with its vendors, which is supported by consistent purchasing practices. The Company believes it obtains favorable buying opportunities relative to many of its competitors. The Company does not request cooperative advertising support from manufacturers, which reduces the manufacturers' costs of doing business and enables them to offer lower prices to the Company. Further, the Company believes it obtains better discounts by entering into purchase arrangements that provide for limited return policies, although the Company always retains the right to return goods that are damaged upon receipt or determined to be improperly manufactured. Finally, volume purchasing of specifically planned quantities purchased well in advance of the season enables more efficient production runs by manufacturers, who, in turn, are provided the opportunity to pass some of the cost savings back to the Company. During 1993, the Company expanded its inventory sourcing capabilities by implementing a direct sourcing program. Under this program, the Company purchases fabric from mills and contracts with certain factories for the assembly of the end product (suits, sport coats or slacks). Such arrangements for fabric and assembly have been with both domestic and foreign mills and factories. Previous purchases from such mills and factories had been through other suppliers. Product acquired during 1994, 1995 and 1996 through the direct sourcing program represented approximately 10%, 20% and 28%, respectively, of total inventory purchases, and the Company expects that purchases through such program will represent between approximately 25% to 35% of total purchases in 1997. To protect against currency exchange risks associated with certain firmly committed and certain other probable, but not firmly committed inventory transactions denominated in a foreign currency, the Company enters into forward exchange contracts. In addition, many of the purchases from foreign vendors are financed by letters of credit. In 1995, the Company entered into license agreements with a limited number of parties under which the Company is entitled to use designer labels, such as "Vito Rufolo", and nationally recognized brand labels such as "Botany" and "Botany 500", in return for royalties paid to the licensor based on the costs of the relevant product. These license agreements generally limit the use of the individual label to products of a specific nature (such as men's suits, men's formal wear or men's shirts). The labels licensed under these agreements are used in connection with a portion of the purchases under the direct sourcing program described above, as well as purchases from other vendors. The Company monitors the performance of these licensed labels compared to their cost and may elect to selectively terminate any license. During 1996, the Company purchased several trademarks, including "Cricketeer," "Joseph & Feiss International," "Baracuta" and "Country Britches," which will be used similarly to the Company's licensed labels. Because of the continued consolidation in the men's tailored clothing industry, the Company may be presented with opportunities to acquire or license other designer or nationally recognized brand labels. 19 21 All merchandise is received into the Company's central warehouse located in Houston, Texas, except for merchandise intended for the VPC stores which is principally received at VPC's Culver City, California distribution center. Once received, merchandise is arranged by size. The computer generates bar-coded garment tags and labels and recommends distribution of the merchandise on the basis of each store's past performance with similar merchandise and existing inventory levels. This distribution is reviewed by a member of the merchandise staff and any necessary changes are made. Merchandise for a store is picked and then moved to the appropriate staging area for shipping. In addition to the central distribution center in Houston, the Company has additional space within certain Men's Wearhouse stores in the majority of its markets which functions as redistribution facilities for their respective areas. The Company's executive offices in Fremont, California also serve as a redistribution facility for the San Francisco Bay area. The Company leases and operates 21 long-haul tractors and 42 trailers, which, together with common carriers, ship merchandise from the vendors to the Company's distribution facilities and from the distribution facilities to centrally located stores within each market. The Company also leases 49 smaller van-like trucks, which are used to ship merchandise locally or within a given geographic region. EXPANSION STRATEGY The Company has experienced significant growth in recent years both from new store openings and increased sales in existing stores. The Company opened its first store in Houston, Texas in 1973 and, as of June 16, 1997, operated 344 Men's Wearhouse stores in 34 states, 17 C&R stores in Southern California, five NAL stores in Texas and one NAL store in Louisiana. Net sales have increased from $170.0 million in 1992 to $483.5 million in 1996, a compound annual growth rate of approximately 30%. During this same period, net earnings increased from $5.9 million in 1992 to $21.1 million in 1996, a compound annual growth rate of 37.5%. The Company's future growth is expected to come primarily from opening new Men's Wearhouse stores in both existing and new markets. Because the Company initially attracts customers within new markets through television advertising, the Company classifies a market as new when it is within a new television market. During 1995 and 1996, the Company opened 48 and 50 new stores, respectively, and entered nine and ten new markets, respectively. At present, the Company plans to open approximately 50 new stores in 1997, of which 17 were open as of June 16, 1997, and to continue its expansion in subsequent years. The Company anticipates that approximately one-half of the new stores will be in new markets. Expansion within existing markets enables the Company to achieve additional economies of scale primarily with regard to advertising, and is generally continued within a given market as long as management believes such market will provide profitable incremental sales volume. The Company enters a new market after management has reviewed the competition, decided that the Company has a reasonable opportunity to establish a market presence and determined that acceptable store locations will be available. In selecting a new market, the Company typically analyzes such criteria as the average household income as well as average household clothing expenditures. Depending upon the market, the Company may enter new markets by opening several stores at the same time, thereby leveraging certain operating expenses. In addition, the Company's advertising, which publicizes the Men's Wearhouse name, merchandise and customer services, benefits multiple stores in the same market. Historically, new multi-store markets have been profitable in the year of entry (before any allocation of corporate overhead, advertising or depreciation) and have experienced sales growth and increased profitability in the first full year of operation. In addition to its traditional means of opening new stores, the Company has acquired a limited number of local menswear retailers in both new and existing markets. The Company believes that the men's tailored clothing industry is experiencing a consolidation as a result of the historical decline in sales of men's tailored clothing. The Company also believes this consolidation presents opportunities for the Company to increase its market share as financially weaker retailers cease operations or consolidate. The Company has been and expects to continue to be presented with opportunities in its industry, including, but not limited to, increased 20 22 direct sourcing of merchandise, acquisitions of menswear retailers and the acquisition or licensing of national brands or designer labels. Since 1992, the Company has closed only three stores. In general, in determining whether to close a store, the Company considers such store's historical and projected performance and the continued desirability of the store's location. Store performance is continually monitored and, from time to time, as neighborhoods and shopping areas change, management may determine that it is in the best interest of the Company to close or relocate a store. There can be no assurance that the Company will be able to accomplish its planned expansion program or that new stores will be profitable. The Company's ability to continue to expand will be dependent, among other things, upon general economic and business conditions affecting consumer spending, the availability of desirable locations and financing and the negotiation of acceptable lease terms for new locations. COMPANY CULTURE The stated mission of Men's Wearhouse is "to maximize sales, provide value to our customers and deliver top quality customer service while still having fun and maintaining our values. These values include nurturing creativity, growing together, admitting to our mistakes, promoting a happy and healthy lifestyle, enhancing a sense of community and striving toward becoming self actualized people." The Company believes that its employees are stakeholders in the Company and that the employment experience provided should result in a quality relationship with the Company. The Company's goal has been to create and maintain an environment where each person can enhance personal skills and enjoy the time spent on the job, thereby increasing his or her productivity. The Company attempts to provide educational and training benefits to employees and strives to treat all employees with respect. The Company believes that this commitment to employees results in loyalty to the Company and a shared participation in the Company's goals and values. The Company is committed to its customers, works to constantly improve its customer relations and seeks to provide outstanding customer service. To further this commitment, management stands behind the employees' judgment in their efforts to satisfy their customers. Men's Wearhouse encourages customers to communicate their feelings regarding their experience at Men's Wearhouse stores and provides a toll free telephone number for such purpose. Messages are received directly by the Company's Chief Executive Officer and a prompt response is provided by the Chief Executive Officer or a designated member of the Company's senior management. The Company has had long-term relationships with many of its suppliers. Since its inception, the Company has attempted to deal honestly with its vendors and believes it has established a reputation for honoring its covenants and promises to vendors. Every Men's Wearhouse store is located within a community and the Company recognizes that it relies on the support of that community for its success. Therefore, the Company has developed a sense of commitment to the communities in which it does business. Whether it participates in civic organizations, supports community charitable organizations or lends a hand in an emergency, the Company tries to involve itself and its employees in selected projects that provide social benefits to the communities in which it does business. The Company's commitment to operate a growing, profitable and socially responsible company is a commitment of which its shareholders can be proud. The Company seeks to adhere to its culture, not only as a means for achieving economic success, but because adherence is a worthwhile goal in and of itself. EMPLOYEE TRAINING AND BENEFITS The Company believes that knowledgeable and loyal employees are critical to maintaining the level of customer service and employee integrity that the Company has enjoyed. To further these beliefs, management has established programs that are intended to motivate its employees. 21 23 The Company has several programs designed to train and educate its employees in areas of customer service and product knowledge. Men's Wearhouse clothing consultants are brought into the Company's California headquarters to attend an orientation and training course at Suits University. Over several days, these employees are instructed in the general corporate culture, operational procedures and product knowledge. The Company believes that, although this program has increased training costs each year, the Company benefits from the increasing productivity of its clothing consultants through increased sales of multiple units of suits, sport coats and slacks. After graduation from Suits University, formal training continues in the stores through video training, interaction with multi-unit management personnel, merchandise personnel and field operations trainers. All field management personnel are brought into regular contact with senior corporate staff at semi-annual retreats. These retreats last from one to four days, are held in environments conducive to training and building employee camaraderie and are each focused on improving the educational program or achieving a corporate goal. The Company believes it has designed incentive programs that support the Company culture and believes that the employee benefits offered by the Company are attractive relative to the benefits offered by others in the retail industry. In addition to medical and dental insurance plans, employees may participate in a diversified 401(k) plan and a medical and child care spending plan. Since the retail environment generally requires long working hours, the Company attempts to promote a sense of family participation and involvement in the Company among its employees. The Company attempts to increase the longevity of employment of its employees, which it believes contributes to the building of relationships with its customers and repeat sales. With the exception of certain financial, accounting and information technology personnel, the majority of upper and middle management started their careers on the sales floor. The Company strongly believes in promoting from within, which, given its emphasis on service, the Company believes ultimately provides a benefit to the customers. Generally, management personnel with several years of tenure have a better understanding of the corporate culture and values of the Company and, therefore, are more likely to provide new employees with consistent messages of corporate philosophy. As the Company expands into new markets, it intends, where possible, to utilize its existing management personnel. 22 24 THE COMPANY'S STORES As of June 16, 1997, the Company operated 367 stores in 34 states. The following table sets forth the location, by state, of these Company stores: California (including 17 C&R stores)........................ 102 Texas (including five NAL stores)........................... 49 Florida..................................................... 22 Michigan.................................................... 18 Illinois.................................................... 16 Ohio........................................................ 14 Washington.................................................. 13 Georgia..................................................... 12 Colorado.................................................... 9 North Carolina.............................................. 9 Minnesota................................................... 8 Indiana..................................................... 8 Massachusetts............................................... 7 Missouri.................................................... 7 Pennsylvania................................................ 7 Tennessee................................................... 7 Arizona..................................................... 6 Maryland.................................................... 6 Oregon...................................................... 6 Virginia.................................................... 5 Wisconsin................................................... 5 South Carolina.............................................. 4 Utah........................................................ 4 Louisiana (including one NAL store)......................... 4 Nevada...................................................... 3 Oklahoma.................................................... 3 Alabama..................................................... 2 Connecticut................................................. 2 Kansas...................................................... 2 Kentucky.................................................... 2 New Hampshire............................................... 2 Idaho....................................................... 1 Iowa........................................................ 1 New Mexico.................................................. 1
Men's Wearhouse stores vary in size from approximately 2,800 to 9,600 total square feet (average square footage at June 16, 1997 was 4,683 square feet), excluding the three outlet stores. Men's Wearhouse stores are primarily located in middle and upper middle income neighborhood strip and specialty retail shopping centers. The Company believes its customers generally prefer to limit the amount of time they spend shopping for men's tailored clothing and seek easily accessible store sites. Men's Wearhouse stores are designed to further the Company's strategy of facilitating sales while making the shopping experience pleasurable. Men's Wearhouse attempts to create a specialty store atmosphere through effective merchandise presentation and sizing, attractive in-store signs and efficient check-out procedures. Most of the traditional stores have similar floor plans and merchandise presentation to facilitate the shopping experience and sales process. Designer, brand name and private label garments are intermixed, and emphasis is placed on the fit of the garment rather than on a particular label or manufacturer. Each store is staffed with clothing consultants and sales associates and has a tailoring facility with at least one tailor. 23 25 The C&R stores vary in size from approximately 5,000 to 9,500 total square feet (average square footage at June 16, 1997 was 6,630 square feet). The NAL stores vary in size from approximately 12,500 to 18,900 total square feet (average square footage at June 16, 1997 was 14,300 square feet). MANAGEMENT INFORMATION AND TELECOMMUNICATION SYSTEMS The Company has aggressively pursued the implementation of technology which provides the opportunity for competitive advantage and which leverages human resources. By implementing a sophisticated management information system, and by integrating it with a highly functional telecommunication system, the Company has effectively managed the operation of its business and its inventory while experiencing substantial growth. The Company's inventory control systems, including purchase order management, automatic replenishment of basic items, and real-time point of sale, have contributed to enhanced performance and profitability and to achieving inventory shrinkage rates that are consistently below industry averages. Electronic Data Interchange with several suppliers and use of data warehousing and decision support technologies have substantially leveraged the efforts of the merchandising team, allowing them to reallocate time from simple and repetitive tasks to those requiring more analytical skills. The Company has developed and is now using an "expert" system to assist in the distribution of incoming merchandise. This system uses rules for distribution decisions which reflect the decision making process of the senior product managers. In addition, in 1996 the Company negotiated a comprehensive telecommunications arrangement with a major telecommunications vendor that allowed the Company to transition its data network to a more modern, flexible, and reliable frame relay environment, while simultaneously reducing operating costs. The Company's voice mail system has not only enhanced internal communication capabilities, it also has provided an actively used channel for improving customer service and it has contributed to the Company's advertising efforts, giving the Company access to unsolicited customer testimonials. The Company employs technology in several other areas of its operations and intends to continue its pursuit of technologies which favorably impact performance and/or the delivery of customer service. Due to continued dramatic changes in the state of the art of information technology, both in general and with regard to the retail industry, the Company has commenced a project to increase the efficiency of its operations and enhance the future productivity of its information technology infrastructure by acquiring products which are now generally available and field tested. Based on the current plan, capital expenditures associated with this project should range from $12 million to $17 million over the next 18 to 24 months, after which the Company will consider the advisability of additional enhancements and expenditures. The Company has benefited significantly from investment in technology in the past, and it is anticipated that this investment will further increase the benefit which the Company derives from technology, both in the near term and in the future. COMPETITION The Company believes that the unit demand for men's tailored clothing has declined. The Company's primary competitors include specialty men's clothing stores, traditional department stores, off-price retailers and manufacturer-owned and independently-owned outlet stores. Over the past several years market conditions have resulted in consolidation of the industry. The Company believes that the principal competitive factors in the men's tailored clothing market are merchandise assortment, quality, price, garment fit, merchandise presentation, store location and customer service. The Company attempts to distinguish itself from its competitors by providing what it believes are the best features of each competing shopping alternative. The Company believes that strong vendor relationships, its direct sourcing program and the buying power of the Company are the principal factors enabling it to obtain quality merchandise at attractive prices. The Company believes that its vendors rely on the Company's predictable payment record and on the Company's history of honoring all promises, including the Company's promise not to advertise names of labeled and 24 26 unlabeled designer merchandise, when requested. Certain of the Company's competitors (principally department stores) are larger and have substantially greater financial, marketing and other resources than the Company and there can be no assurance that the Company will be able to compete successfully with them in the future. SEASONALITY Like most retailers, the Company's business is subject to seasonal fluctuations. Historically, over 30% of the Company's net sales and approximately 50% of its net earnings have been generated during the fourth quarter of each year. Because of the seasonality of the Company's business, results for any quarter are not necessarily indicative of the results that may be achieved for the full year. TRADEMARKS AND SERVICE MARKS The Company is the owner in the United States of the trademark and service mark "The Men's Wearhouse(R)", and of federal registrations therefor expiring in 2009 and 2002, respectively, subject to renewal. The Company's rights in the "The Men's Wearhouse" mark are a significant part of the Company's business, as the mark has become well known through the Company's television and radio advertising campaigns. Accordingly, the Company intends to maintain its mark and the related registrations. The Company is also the owner in the United States of the service marks "C&R", "C&R Clothiers", "Walter Pye's" and "NAL". Such marks are used to identify the retail store services of and are the tradenames utilized by the retail clothing stores operated by VPC. In addition to The Men's Wearhouse, C&R Clothiers and NAL trademarks/service marks, the Company owns or licenses other trademarks/service marks used in the business, principally in connection with the labeling of product purchased through the direct sourcing program. LEGAL PROCEEDINGS The Company is involved in various routine legal proceedings, including ongoing litigation, incidental to the conduct of its business. Management believes that none of these matters will have a material adverse effect on the financial condition or results of operations of the Company. SELLING SHAREHOLDERS The following table sets forth information, as of June 16, 1997, and after giving effect to this offering (assuming no exercise of the Underwriters' over-allotment option), with respect to the beneficial ownership of Common Stock by each of the Selling Shareholders. Unless otherwise indicated, each person has sole voting power and investment power with respect to the shares attributed to him.
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP BEFORE OFFERING AFTER OFFERING ----------------------- SHARES TO ---------------------- SHARES PERCENT(%) BE SOLD SHARES PERCENT(%) --------- ---------- --------- --------- ---------- George Zimmer......................... 3,171,742(1) 15.1 325,000 2,846,742 12.9 Robert E. Zimmer...................... 1,781,837(2) 8.5 825,000 956,837 4.3 Richard E. Goldman.................... 1,696,691 8.1 300,000 1,396,691 6.3 James E. Zimmer....................... 1,031,146(3) 4.9 150,000 881,146 4.0
- --------------- (1) Consists of shares held by George Zimmer in his capacity as trustee for the George Zimmer 1988 Living Trust. (2) Does not include 21,111 shares of Common Stock held by Robert Zimmer's wife. (3) Includes 1,029,323 shares held by James Zimmer in his capacity as trustee for the James Edward Zimmer 1989 Living Trust and 1,823 shares held by Mr. Zimmer's minor daughter. The shares set forth in the foregoing table do not include 29,157 shares, 1,886 shares, 26,603 shares and 21,031 shares, respectively, allocated to the ESP accounts of Messrs. George Zimmer, Robert Zimmer, 25 27 Richard Goldman and James Zimmer. The ESP provides that participants have voting rights on all matters requiring the vote of shareholders with respect to shares of Common Stock allocated to their accounts. George Zimmer is the Chairman of the Board and Chief Executive Officer of the Company, Robert E. Zimmer is the Senior Vice President -- Real Estate and a Director of the Company, Richard E. Goldman is the Executive Vice President and a Director of the Company and James E. Zimmer is the Senior Vice President -- Merchandising and a Director of the Company. The Selling Shareholders have granted to the Underwriters an option to purchase up to 390,000 additional shares of Common Stock at the public offering price less the underwriting discount set forth on the cover page of this Prospectus, solely to cover over-allotments, if any. See "Underwriting". DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company consists of 50,000,000 shares of Common Stock, par value $.01 per share, and 2,000,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock"). At June 18, 1997, 21,026,576 shares of Common Stock were outstanding and held by 280 holders of record and no shares of Preferred Stock were outstanding. A total of 1,389,177 shares of Common Stock are reserved for future issuance of which (i) 570,427 shares are reserved for issuance upon the exercise of options granted under the Company's 1992 Stock Option Plan, (ii) 750,000 shares are reserved for issuance upon the exercise of options granted under the Company's 1996 Stock Option Plan, (iii) 45,000 shares are reserved for issuance upon the exercise of options granted under the Company's Non-Employee Director Stock Option Plan and (iv) 23,750 shares are reserved for issuance upon the exercise of options granted under miscellaneous employee stock option agreements. COMMON STOCK Holders of shares of Common Stock are entitled to one vote per share in the election of directors and on all other matters submitted to a vote of shareholders. Such holders do not have the right to cumulate their votes in the election of directors. Holders of Common Stock have no redemption or conversion rights and no preemptive or other rights to subscribe for securities of the Company. In the event of a liquidation, dissolution or winding up of the Company, holders of Common Stock are entitled to share equally and ratably in all of the assets remaining, if any, after satisfaction of all debts and liabilities of the Company, and the preferential rights of any series of Preferred Stock then outstanding. The shares of Common Stock outstanding are fully paid and non-assessable. Holders of Common Stock have an equal and ratable right to receive dividends, when, as and if declared by the Board of Directors out of funds legally available therefor and only after payment of, or provision for, full dividends on all outstanding shares of any series of Preferred Stock and after the Company has made provision for any required sinking or purchase funds for any series of Preferred Stock. The Company's Credit Agreement prohibits the payment of cash dividends on the Common Stock. PREFERRED STOCK The Preferred Stock may be issued, from time to time in one or more series, and the Board of Directors, without further approval of the shareholders, is authorized to fix the dividend rights and terms, redemption rights and terms, liquidation preferences, conversion rights, voting rights and sinking fund provisions applicable to each such series of Preferred Stock. If the Company issues a series of Preferred Stock in the future that has voting rights or preference over the Common Stock with respect to the payment of dividends and upon the Company's liquidation, dissolution or winding up, the rights of the holders of the Common Stock offered hereby may be adversely affected. The issuance of shares of Preferred Stock could be utilized, under certain circumstances, in an attempt to prevent an acquisition of the Company. The Company has no present intention to issue any shares of Preferred Stock. 26 28 LIMITATION OF DIRECTOR LIABILITY The Restated Articles of Incorporation of the Company contain a provision that limits the liability of the Company's directors as permitted under Texas law. The provision eliminates the liability of a director to the Company or its shareholders for monetary damages for negligent or grossly negligent acts or omissions in the director's capacity as a director. The provision does not affect the liability of a director (i) for breach of his duty of loyalty to the Company or to shareholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) for acts or omissions for which the liability of a director is expressly provided by an applicable statute, or (iv) in respect of any transaction from which a director received an improper personal benefit. Pursuant to the Restated Articles of Incorporation, the liability of directors will be further limited or eliminated without action by shareholders if Texas law is amended to further limit or eliminate the personal liability of directors. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Common Stock is American Stock Transfer & Trust Company. 27 29 UNDERWRITING The Underwriters named below have severally agreed, subject to the terms and conditions of the Underwriting Agreement (the form of which is filed as an exhibit to the Company's Registration Statement of which this Prospectus is a part), to purchase from the Company and the Selling Shareholders the aggregate number of shares of Common Stock set forth opposite their names:
NUMBER OF UNDERWRITER SHARES ----------- --------- Bear, Stearns & Co. Inc..................................... Morgan Stanley & Co. Incorporated........................... PaineWebber Incorporated.................................... Robertson, Stephens & Company LLC........................... --------- Total............................................. 2,600,000 ========
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that, if any of the foregoing shares of Common Stock are purchased by the Underwriters pursuant to the Underwriting Agreement, all such shares must be so purchased. The Company and the Selling Shareholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Underwriters may be required to make in respect thereof. The Company has been advised that the Underwriters propose to offer the shares of Common Stock to the public initially at the public offering price set forth on the cover page of this Prospectus and to certain selected dealers (who may include the Underwriters) at such public offering price less a concession not to exceed $ per share. The selected dealers may reallow a concession to certain other dealers not to exceed $ per share. After the initial offering to the public, the public offering price, the concession to selected dealers and the reallowance to other dealers may be changed by the Underwriters. In order to facilitate this offering, certain persons participating in this offering may engage in transactions that stabilize, maintain, or otherwise affect the price of the Common Stock during and after this offering. Specifically, the Underwriters may over-allot or otherwise create a short position in the Common Stock for their own account by selling more shares of Common Stock than have been sold to them by the Company and the Selling Shareholders. The Underwriters may elect to cover any such short position by purchasing shares of Common Stock in the open market or by exercising the over-allotment option granted to the Underwriters. In addition, such persons may stabilize or maintain the price of the Common Stock by bidding for or purchasing shares of Common Stock in the open market and may impose penalty bids, under which selling concessions allowed to syndicate members or other broker-dealers participating in this offering are reclaimed if shares of Common Stock previously distributed in this offering are repurchased in connection with stabilization transactions or otherwise. The effect of these transactions may be to stabilize or maintain the market price of the Common Stock at a level above that which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price of the Common Stock to the extent that it discourages resales thereof. No representation is made as to the magnitude or effect of any such stabilization or other transactions. Such transactions may be effected on the Nasdaq or otherwise and, if commenced, may be discontinued at any time. In connection with this offering, certain underwriters (and selling group members) may engage in passive market making transactions in the Common Stock on Nasdaq in accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103 permits, upon the satisfaction of certain conditions, underwriting and selling group members participating in a distribution that are also registered Nasdaq market makers in the security being distributed (or a related security) to engage in limited passive market making transactions during the period when Regulation M would otherwise prohibit such activity. In general, a passive market maker may not bid for or purchase a security at a price that exceeds the highest independent bid for those securities by a person that is not participating in the distribution and must identify its passive market making bids on Nasdaq electronic inter-dealer reporting system. In addition, the net daily purchases made by a passive market maker generally may not exceed 30% of such market maker's average daily trading volume in the 28 30 security for the two full consecutive calendar months (or any 60 consecutive days ending within 10 days) immediately preceding the date of filing of the Registration Statement of which this Prospectus forms a part. The Selling Shareholders have granted to the Underwriters an option to purchase up to 390,000 additional shares of Common Stock at the public offering price less the underwriting discount set forth on the cover page of this Prospectus, solely to cover over-allotments, if any. Such option may be exercised at any time until 30 days after the date of this Prospectus. If the Underwriters exercise such option, each of the Underwriters will be committed, subject to certain conditions, to purchase a number of additional shares proportionate to such Underwriter's initial commitment as indicated in the preceding table. In connection with this offering, the Company and the Selling Shareholders, who are executive officers and directors, and currently own in the aggregate approximately 36.5% of the Common Stock, have agreed that they will not sell, contract to sell or otherwise dispose of any shares of capital stock of the Company for a period of 90 days after the date of this Prospectus without the prior written consent of the Underwriters, except for the shares offered hereby and issuances or sales by the Company upon the exercise of employee stock options. Sheldon I. Stein, a Senior Managing Director of Bear, Stearns & Co. Inc., became a director of the Company in July 1995. Under the terms of the Company's Non-Employee Director Stock Option Plan, Mr. Stein has received stock options covering an aggregate of 7,000 shares of Common Stock. LEGAL MATTERS Certain legal matters with respect to the Common Stock have been passed upon for the Company and for the Selling Shareholders by Fulbright & Jaworski L.L.P., Houston, Texas, and for the Underwriters by Gardere & Wynne, L.L.P. of Dallas, Texas. Michael W. Conlon, a partner in the firm of Fulbright & Jaworski L.L.P., is the Secretary of the Company. EXPERTS The consolidated financial statements of the Company as of February 3, 1996 and February 1, 1997 and for each of the three years in the period ended February 1, 1997 included in the Company's Annual Report on Form 10-K for the year ended February 1, 1997 and incorporated by reference in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and has been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 29 31 ====================================================== NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. UNDER NO CIRCUMSTANCES SHALL THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE PURSUANT TO THIS PROSPECTUS CREATE ANY IMPLICATION THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. ------------------ TABLE OF CONTENTS
PAGE ---- Available Information.................. 2 Incorporation of Certain Documents by Reference............................ 2 Prospectus Summary..................... 3 Risk Factors........................... 7 Recent Developments.................... 9 Possible Acquisition................... 10 Use of Proceeds........................ 11 Price Range of Common Stock............ 11 Dividend Policy........................ 11 Capitalization......................... 12 Selected Consolidated Financial Information.......................... 13 Financing and Capital Resources........ 14 Business............................... 16 Selling Shareholders................... 25 Description of Capital Stock........... 26 Underwriting........................... 28 Legal Matters.......................... 29 Experts................................ 29
====================================================== ====================================================== 2,600,000 SHARES [MEN'S WEARHOUSE LOGO] COMMON STOCK ------------------------------ PROSPECTUS ------------------------------ BEAR, STEARNS & CO. INC. MORGAN STANLEY DEAN WITTER PAINEWEBBER INCORPORATED ROBERTSON, STEPHENS & COMPANY , 1997 ====================================================== 32 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The estimated expenses in connection with this Offering are: Securities and Exchange Commission Registration Fee......... $ 30,580 Nasdaq Listing Fee.......................................... 17,500 NASD Filing Fee............................................. 10,592 Legal Fees and Expenses..................................... 40,000 Accounting Fees and Expenses................................ 20,000 Blue Sky Fees and Expenses (including legal fees)........... 10,000 Printing Expenses........................................... 50,000 Transfer Agent and Registrar Fees........................... 5,000 Miscellaneous............................................... 16,328 -------- TOTAL............................................. $200,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Article 2.02-1 of the Texas Business Corporation Act provides that any director or officer of a Texas corporation may be indemnified against judgments, penalties, fines, settlements and reasonable expenses actually incurred by him in connection with or in defending any action, suit or proceeding in which he is a party by reason of his position. With respect to any proceeding arising from actions taken in his official capacity as a director or officer, he may be indemnified so long as it shall be determined that he conducted himself in good faith and that he reasonably believed that such conduct was in the corporation's best interests. In cases not concerning conduct in his official capacity as a director or officer, a director may be indemnified as long as he reasonably believed that his conduct was not opposed to the corporation's best interests. In the case of any criminal proceeding, a director or officer may be indemnified if he had no reasonable cause to believe his conduct was unlawful. If a director or officer is wholly successful, on the merits or otherwise, in connection with such a proceeding, such indemnification is mandatory. The Registrant's Bylaws provide for indemnification of its present and former directors and officers to the fullest extent provided by Article 2.02-1. The Registrant's Bylaws further provide for indemnification of officers and directors against reasonable expenses incurred in connection with the defense of any such action, suit or proceeding in advance of the final disposition of the proceeding. The Registrant's Articles of Incorporation were amended on September 6, 1991, to eliminate or limit liabilities of directors for breaches of their duty of care. The amendment does not limit or eliminate the right of the Registrant or any shareholder to pursue equitable remedies such as an action to enjoin or rescind a transaction involving a breach of a director's duty of care, nor does it affect director liability to parties other than the Registrant or its shareholders. In addition, directors will continue to be liable for (i) breach of their duty of loyalty, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) declaring an illegal dividend or stock repurchase, (iv) any transaction in which the directors received an improper personal benefit, or (v) acts or omissions for which the liability of directors is expressly provided by statute. In addition, the amendment applies only to claims under Texas law against a director arising out of his role as a director and not, if he is also an officer, his role as an officer or in any other capacity and does not limit a director's liability under any other law, such as federal securities law. Texas corporations are also authorized to obtain insurance to protect officers and directors from certain liabilities, including liabilities against which the corporation cannot indemnify its directors and officers. The Registrant currently has in effect a director's and officer's liability insurance policy, which provides coverage in the maximum amount of $10,000,000, subject to a $250,000 deductible. II-1 33 ITEM 16. EXHIBITS. *1.1 -- Form of Underwriting Agreement. 3.1 -- Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 30, 1994). 3.2 -- By-laws of the Company, as amended (incorporated by reference from Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended February 1, 1997). 4.1 -- Restated Articles of Incorporation (included as Exhibit 3.1). 4.2 -- By-laws, as amended (included as Exhibit 3.2). 4.3 -- Form of Common Stock certificate (incorporated by reference from Exhibit 4.3 to the Registrant's Registration Statement on Form S-1 (Registration No. 33- 45949)). 4.4 -- Employment Agreement dated as of January 31, 1991, by and between the Company and David H. Edwab, including the First Amendment thereto dated as of September 30, 1991 (incorporated by reference from Exhibit 4.4 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-45949)). 4.5 -- Second Amendment effective as of January 1, 1993, to Employment Agreement dated as of January 31, 1991, by and between the Company and David H. Edwab (incorporated by reference from Exhibit 4.5 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-60516)). 4.6 -- Second [sic] Amendment dated as of April 12, 1994, to Employment Agreement dated as of January 31, 1991 (incorporated by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 1995). 4.7 -- Option Issuance Agreement dated as of September 30, 1991, by and between the Company and David H. Edwab (incorporated by reference from Exhibit 4.5 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-45949)). 4.8 -- First Amendment to Option Issuance Agreement dated April 22, 1992, but effective as of September 30, 1991 (incorporated by reference from Exhibit 4.7 to the Registrant's Registration Statement on Form S-8 (Registration No. 33-48109)). 4.9 -- Second Amendment to Option Issuance Agreement dated effective as of January 1, 1993 (incorporated by reference from Exhibit 4.8 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-60516)). 4.10 -- First [sic] Amendment to Option Issuance Agreement dated as of April 12, 1994 (incorporated by reference to Exhibit 4.10 to the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 1995). 4.11 -- Indenture dated March 1, 1996, between the Company and Texas Commerce Bank National Association, as trustee including Form of Note (incorporated by reference from Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter ended May 4, 1996). 4.12 -- Revolving Credit Agreement dated as of June 2, 1997, by and among the Company, NationsBank of Texas, N.A. and the Banks listed therein, including form of Revolving Note (incorporated by reference from Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarter ended May 3, 1997). *5.1 -- Opinion of Fulbright & Jaworski L.L.P. *23.1 -- Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1). *23.2 -- Consent of Deloitte & Touche LLP. *24.1 -- Powers of Attorney from certain members of the Board of Directors of the Company (contained on page II-5).
- --------------- * Filed herewith. + To be filed by amendment. II-2 34 As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant has not filed with this Registration Statement certain instruments defining the rights of holders of long-term debt of the Registrant and its subsidiaries because the total amount of securities authorized under any of such instruments does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant agrees to furnish a copy of any such agreement to the Commission upon request. ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of the Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of the Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 35 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on June 18, 1997. THE MEN'S WEARHOUSE, INC. By: /s/ GEORGE ZIMMER ----------------------------------- George Zimmer Chairman of the Board and Chief Executive Officer (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints David H. Edwab and Gary G. Ckodre, or any of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same and all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting said attorney-in-fact and agent, and any of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ GEORGE ZIMMER Chairman of the Board, Chief June 18, 1997 - ----------------------------------------------------- Executive Officer and Director George Zimmer (Principal Executive Officer) /s/ DAVID EDWAB President and Director June 18, 1997 - ----------------------------------------------------- David Edwab /s/ GARY G. CKODRE Vice President-Finance and June 18, 1997 - ----------------------------------------------------- Principal Financial and Gary G. Ckodre Accounting Officer (Principal Financial and Accounting Officer) /s/ RICHARD E. GOLDMAN Executive Vice President and June 18, 1997 - ----------------------------------------------------- Director Richard E. Goldman /s/ ROBERT E. ZIMMER Senior Vice President -- Real June 18, 1997 - ----------------------------------------------------- Estate and Director Robert E. Zimmer /s/ JAMES E. ZIMMER Senior Vice President -- June 18, 1997 - ----------------------------------------------------- Merchandising and Director James E. Zimmer
II-4 36
SIGNATURE TITLE DATE --------- ----- ---- /s/ HARRY M. LEVY Senior Vice President -- Planning June 18, 1997 - ----------------------------------------------------- and Systems, Chief Information Harry M. Levy Officer and Director /s/ RINALDO BRUTOCO Director June 18, 1997 - ----------------------------------------------------- Rinaldo Brutoco /s/ MICHAEL L. RAY Director June 18, 1997 - ----------------------------------------------------- Michael L. Ray /s/ SHELDON I. STEIN Director June 18, 1997 - ----------------------------------------------------- Sheldon I. Stein
II-5 37 INDEX TO EXHIBITS
NUMBER EXHIBIT ------ ------- 1.1 Form of Underwriting Agreement. 5.1 Opinion of Fulbright & Jaworski L.L.P. 23.1 Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1). 23.2 Consent of Deloitte & Touche LLP. 24.1 Powers of Attorney from certain members of the Board of Directors of the Company (contained on page II-5).
EX-1.1 2 UNDERWRITING AGREEMENT 1 2,600,000 Shares of Common Stock THE MEN'S WEARHOUSE, INC. UNDERWRITING AGREEMENT _____________, 1997 BEAR, STEARNS & CO. INC. MORGAN STANLEY & CO. INCORPORATED PAINEWEBBER INCORPORATED ROBERTSON, STEPHENS & COMPANY LLC c/o Bear, Stearns & Co. Inc. 245 Park Avenue New York, N.Y. 10167 Ladies and Gentlemen: The Men's Wearhouse , Inc., a Texas corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to you, Bear, Stearns & Co. Inc., Morgan Stanley & Co. Incorporated, PaineWebber Incorporated, and Robertson, Stephens & Company LLC (collectively, "you" or the "Underwriters"), 1,000,000 shares of common stock, par value $0.01 per share, of the Company ("Common Stock"), and the undersigned selling shareholders of the Company named in Schedule II hereto (the "Selling Shareholders") propose, subject to the terms and conditions stated herein, to sell to the Underwriters an additional 1,600,000 shares of Common Stock. The preceding aggregate 2,600,000 shares of Common Stock is herein referred to as the "Firm Shares." In addition, for the sole purpose of covering over-allotments in connection with the sale of the Firm Shares, the Selling Shareholders propose to sell to the Underwriters, at the option of the Underwriters, up to an additional 390,000 shares of Common Stock (the "Additional Shares"). The Firm Shares and any Additional Shares purchased by the Underwriters are herein referred to as the "Shares." 2 1. Representations and Warranties of the Company and the Selling Shareholders. A. The Company represents and warrants to, and agrees with, each of the several Underwriters that: (a) The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (Registration No. 333-____), for the registration of the Shares under the Securities Act of 1933, as amended (the "Act"). Such registration statement, as may be amended by an amendment or amendments thereto, including the prospectus, financial statements, exhibits and all other documents filed as a part thereof, when it shall become effective, is herein called the "Registration Statement"; and the prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations under the Act (the "Regulations"), is herein called the "Prospectus." The term "Preliminary Prospectus" as used herein means any preliminary prospectus relating to the Shares as described in Rule 430 of the Regulations. Any reference herein to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on or before the effective date of the Registration Statement, the date of any Preliminary Prospectus or the date of the Prospectus, as the case may be, and any reference herein to the terms "amend," "amendment," or "supplement" with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include (i) the filing of any document under the Exchange Act after the effective date of the Registration Statement, the date of such Preliminary Prospectus or the date of the Prospectus, as the case may be, which is incorporated therein by reference and (ii) any such document so filed. (b) Neither the Commission nor the Blue Sky or securities authority of any jurisdiction has issued a stop order suspending the effectiveness of the Registration Statement, preventing or suspending the use of any Preliminary Prospectus, the Prospectus, the Registration Statement, or any amendment or supplement thereto, refusing to permit the effectiveness of the Registration Statement, or suspending the registration or qualification of the Shares, nor, to the Company's knowledge, has any of such authorities instituted or threatened to institute any proceedings with respect to a stop order. (c) When the Registration Statement shall become effective, when any amendment to the Registration Statement becomes effective, when the Prospectus is first filed with the Commission pursuant to Rule 424(b) of the Regulations, when any supplement to or amendment of the Prospectus is filed with the Commission, and at the Closing Date, and the Additional Closing Date, if any (as hereinafter respectively defined), the Registration Statement and the Prospectus and any amendments thereof and supplements thereto will comply in all material respects with the applicable provisions of the Act and the Regulations and the Exchange Act and the rules and regulations -2- 3 thereunder and will not contain an untrue statement of a material fact and will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. At the time of the first filing of the Preliminary Prospectus with the Commission (whether filed as part of the Registration Statement for the registration of the Shares or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment thereof or supplement thereto was first filed with the Commission, such Preliminary Prospectus and any amendments thereof and supplements thereto complied in all material respects with the applicable provisions of the Act and the Regulations and the Exchange Act and the rules and regulations thereunder and did not contain an untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. No representation and warranty is made in this subsection (c), however, with respect to any information contained in or omitted from the Registration Statement or the Prospectus or the Preliminary Prospectus or any amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of you as herein stated expressly for use in connection with the preparation thereof. The documents incorporated by reference in the Registration Statement and the Prospectus, when they were first filed with the Commission, complied in all material respects with the applicable provisions of the Exchange Act and the rules and regulations of the Commission thereunder; and any documents so filed and incorporated by reference after the effective date of the Registration Statement shall, when they are filed with the Commission, conform in all material respects with the requirements of the applicable provisions of the Exchange Act and the rules and regulations of the Commission thereunder. (d) To the Company's knowledge, Deloitte & Touche LLP, who have audited the consolidated financial statements, together with the related schedules and notes, of the Company that are incorporated by reference in the Registration Statement and whose report is also incorporated by reference in the Registration Statement, are independent public accountants with regard to the Company as required by the Act and the Regulations. (e) Each of the Company and The Men's Wearhouse (Nevada) Inc., a Nevada corporation, TMW Texas General, Inc., a California corporation, TMW Texas Limited, Inc., a California corporation, Value Priced Clothing, Inc., a California corporation, Value Priced Clothing II, Inc., a Texas corporation, and Value Priced Liquidators, Inc., a Delaware corporation (the "Corporate Subsidiaries"), has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation. Each of the Company and the Corporate Subsidiaries is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing that will not in the aggregate have a material adverse -3- 4 effect on the Company and the Subsidiaries (as hereinafter defined) taken as a whole. TMW Texas Retail, L.P., a Texas limited partnership (together with the Corporate Subsidiaries, the "Subsidiaries"), has been duly formed and is validly existing as a limited partnership under the Texas Revised Limited Partnership Act, as amended, with partnership power and authority to own the properties it currently owns and to conduct the business it currently conducts. Each of the Company and the Corporate Subsidiaries has all corporate power and authority, and all consents, approvals, authorizations, orders, registrations, qualifications, licenses and permits of and from all public, regulatory or governmental agencies and bodies, necessary to own, lease and operate its properties and conduct its business as now being conducted and as described in the Registration Statement and the Prospectus, except where failure could not reasonably be expected to have a material adverse effect on the Company and the Subsidiaries taken as a whole. (f) The Company has all requisite corporate power and authority to issue, sell and deliver the Shares being issued, sold, and delivered by it in accordance with and upon the terms set forth in this Agreement, the Registration Statement and the Prospectus. Those Shares have been duly authorized and, when delivered and sold in accordance with this Agreement, will be validly issued and outstanding and fully paid and nonassessable, will not have been issued in violation of or subject to any preemptive or similar rights to subscribe for such Shares or any restriction upon the transfer of any shares of capital stock of the Company pursuant to its articles of incorporation, bylaws or any agreement to which the Company is a party or by which the Company is bound. The Common Stock, including the Firm Shares and the Additional Shares, conforms to the description thereof contained in the Registration Statement and the Prospectus. (g) All of the issued and outstanding shares of Common Stock have been duly and validly authorized and issued, are fully paid and nonassessable and were not issued in violation of or subject to any preemptive rights. As of the date of this Agreement, the Company had an authorized and outstanding capitalization as set forth in the Registration Statement and the Prospectus. Except as set forth in the Registration Statement, no holders of Common Stock or other securities of the Company have registration rights with respect to any securities of the Company, and all holders of securities of the Company having rights to registration of shares of Common Stock, or other securities, as a result of the filing of the Registration Statement have, with respect to the offering contemplated thereby, waived such rights or such rights have expired by reason of lapse of time following notification of the Company's intent to file the Registration Statement, or have included securities in the Registration Statement pursuant to the exercise of such rights. (h) The Company does not own or control, directly or indirectly, any corporation, association or other entity other than (i) the Subsidiaries and (ii) the joint venture between one of the Corporate Subsidiaries, Value Priced Liquidators, Inc., and Buxbaum, Ginsberg & Associates, Inc. regarding the acquisition and liquidation of certain assets of Kuppenheimer Men's Clothiers. All the outstanding capital stock of the Corporate Subsidiaries is duly and validly issued, fully paid and nonassessable and is -4- 5 owned by the Company free and clear of any liens, pledges, encumbrances, claims, security interests and other defects in title whatsoever. (i) Neither the Company nor any Subsidiary is in violation of its charter, bylaws or partnership agreement, as the case may be, or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any material bond, debenture, note or other evidence of indebtedness or in any material contract, indenture, mortgage, deed of trust, loan agreement, lease, joint venture or other agreement or instrument to which the Company or such Subsidiary is a party or by which any of their properties may be bound, or in violation of any law, order, rule, regulation, writ, injunction, judgment or decree of any court or governmental agency or body, the violation of which could reasonably be expected to have a material adverse effect on the Company and the Subsidiaries taken as a whole. (j) This Agreement has been duly and validly authorized, executed and delivered by the Company and is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that (i) rights to indemnity hereunder may be limited by federal or state securities laws or public policy underlying such laws, (ii) such enforcement may be subject to applicable federal or state bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws or court decisions relating to or affecting creditors' rights generally and (iii) such enforcement may be limited by equitable principles of general applicability, including concepts of materiality, reasonableness, good faith and fair dealing, equitable subordination and the possible unavailability of specific performance or injunctive relief (regardless of whether considered in a proceeding in equity or at law or whether codified by statute). (k) The execution and delivery of this Agreement by the Company, the issuance and sale of the Shares by the Company, the performance of the Company's obligations under this Agreement and the consummation of the transactions contemplated hereby will not (i) conflict with or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) or require consent under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary, pursuant to the terms of any agreement, instrument, franchise, license or permit to which the Company or any Subsidiary is a party or by which any of such entities or their respective properties or assets may be bound, or (ii) violate or conflict with any provision of the articles or certificate of incorporation, bylaws or partnership agreement, as the case may be, of the Company or any Subsidiary or any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any Subsidiary or any of their respective properties or assets. No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any Subsidiary or any of their respective properties or assets, and no further approval or authorization of any -5- 6 shareholder or the board of directors of the Company, or any other person, is required for the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the issuance, sale and delivery of the Shares to be issued, sold and delivered by the Company hereunder, except the registration of the Shares under the Act and such consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses and permits as may be required under state securities or Blue Sky laws in connection with the Underwriters' purchase and distribution of the Shares. (l) The consolidated financial statements of the Company, together with the related schedules and notes, forming a part of the Registration Statement and the Prospectus, fairly present the consolidated financial position and results of operations of the Company and the Subsidiaries at the respective dates and for the respective periods to which they apply. All consolidated financial statements of the Company, together with the related schedules and notes, incorporated by reference in the Registration Statement have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as may be otherwise stated therein. The selected and summary financial and statistical data included in the Registration Statement present fairly the information shown therein and have been compiled on a basis substantially consistent with the financial statements presented therein. (m) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, except as set forth in the Registration Statement and the Prospectus, there has not been (i) any material adverse change in the business, prospects, properties, operations, condition (financial or otherwise) or results of operations of the Company and the Subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, (ii) any transaction that is material to the Company and the Subsidiaries taken as a whole, except transactions in the ordinary course of business, (iii) any obligation or liability, direct or contingent, incurred by the Company or the Subsidiaries that is material to the Company and the Subsidiaries taken as a whole, except obligations and liabilities incurred or undertaken in the ordinary course of business, (iv) any change in the capital stock of the Company or the Subsidiary or (v) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company or the Subsidiary. (n) Except as set forth in the Prospectus, there is not pending or, to the Company's knowledge, threatened any action, suit, claim or proceeding against the Company, the Subsidiaries or any of their respective officers or any of their properties, assets or rights before any court or governmental agency or body that could reasonably be expected to have a material adverse effect on the Company and the Subsidiaries taken as a whole or prevent the consummation of the transactions contemplated herein. There are no contracts or documents of the Company or the Subsidiary that are required to be described in all material respects in the Prospectus or to be filed as exhibits to the -6- 7 Registration Statement by the Act or the Regulations that have not been accurately described in the Prospectus or filed as exhibits to the Registration Statement. (o) The Common Stock currently outstanding is quoted on the Nasdaq National Market, and a notice with respect to the Shares has been duly filed with, and the applicable fees have been paid to, the Nasdaq National Market. (p) The Company has not taken and will not take, directly or indirectly, any action which constituted or which was designed to constitute or which might be reasonably expected to cause or result in stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. B. Each Selling Shareholder represents and warrants to, and agrees with, each of the several Underwriters that: (a) Such Selling Shareholder has (i) caused a certificate or certificates for the number of Shares to be sold by such Selling Shareholder hereunder to be delivered to David H. Edwab, endorsed in blank or with blank stock powers duly executed, with signatures appropriately guaranteed, such certificate or certificates to be held in the custody of David H. Edwab, in accordance with the terms of a custody agreement in the form heretofore delivered to you, for delivery pursuant to the provisions hereof on the Closing Date and Additional Closing Date, if any, and (ii) granted an irrevocable power of attorney to David H. Edwab, as such Selling Shareholder's attorney-in-fact (the "Attorney-in-Fact") in the form heretofore delivered to you (the custody agreement, together with the irrevocable power of attorney, executed by such Selling Shareholder being hereinafter collectively referred to as the "Custody Agreement"). (b) The execution, delivery and performance of this Agreement and the Custody Agreement by or on behalf of such Selling Shareholder and the consummation of the transactions contemplated hereby and thereby will not (i) conflict with or result in the breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) or require consent under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of such Selling Shareholder pursuant to the terms of any agreement, trust agreement, instrument, franchise, license or permit to which such Selling Shareholder is a party or by which such Selling Shareholder or any of such Selling Shareholder's property or assets may be bound, or (ii) violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over such Selling Shareholder or such Selling Shareholder's properties or assets. (c) Such Selling Shareholder has, and at the time of delivery of the Shares to be sold by such Selling Shareholder such Selling Shareholder will have, full legal right, power, authority and capacity, and, except as required under the Act and state -7- 8 securities and Blue Sky laws, all necessary consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses and permits of and from all public, regulatory or governmental agencies and bodies as are required for the execution, delivery and performance of this Agreement and the Custody Agreement and the consummation of the transactions contemplated hereby and thereby, including the sale, assignment, transfer and delivery of the Shares to be sold, assigned, transferred and delivered by such Selling Shareholder hereunder. (d) Each of this Agreement and the Custody Agreement has been duly authorized (if applicable) and duly and validly executed and delivered by such Selling Shareholder and is a valid and binding obligation of such Selling Shareholder, enforceable against such Selling Shareholder in accordance with its terms, except to the extent that (i) rights to indemnity hereunder may be limited by applicable federal or state securities laws or the public policy underlying such laws, (ii) such enforcement may be subject to applicable federal or state bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws or court decisions relating to or affecting creditors' rights generally and (iii) such enforcement may be limited by equitable principles of general applicability, including concepts of materiality, reasonableness, good faith and fair dealing, equitable subordination and the possible unavailability of specific performance or injunctive relief (regardless of whether considered in a proceeding in equity or at law or whether codified by statute). (e) Such Selling Shareholder has good, valid and marketable title to the Shares to be sold by such Selling Shareholder pursuant to this Agreement, free and clear of all liens, pledges, encumbrances, claims, security interests, shareholders' agreements, voting trusts, other defects in title whatsoever and restrictions on transfer (other than those restrictions on transfer imposed by the Act and the securities or Blue Sky laws of certain jurisdictions), with full power to deliver such Shares hereunder, and upon the delivery of and payment for such Shares as herein contemplated, each of the Underwriters will acquire good, valid and marketable title to the Shares purchased by it from such Selling Shareholder, free and clear of all liens, pledges, encumbrances, claims, security interests, shareholders' agreements, voting trusts, other defects in title whatsoever and restrictions on transfer (other than those restrictions on transfer imposed by the Act and the securities or Blue Sky laws of certain jurisdictions). (f) Such Selling Shareholder has not taken and will not take, directly or indirectly, any action which constituted or which was designed to constitute or which might be reasonably expected to cause or result in stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of any of the Shares. (g) When the Registration Statement shall become effective, when any amendment to the Registration Statement becomes effective, when the Prospectus is first filed with the Commission pursuant to Rule 424(b) of the Regulations, when any amendment of or supplement to the Prospectus is filed with the Commission and at the Closing Date and the Additional Closing Date, if any, such parts of the Registration -8- 9 Statement and the Prospectus and any amendments thereof and supplements thereto as they relate to such Selling Shareholder and are based upon information furnished to the Company by or on behalf of such Selling Shareholder expressly for use therein will not contain an untrue statement of a material fact and will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. When the Preliminary Prospectus was first filed with the Commission (whether filed as part of the Registration Statement for the registration of the Shares or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment thereof or supplement thereto was first filed with the Commission, such parts of the Preliminary Prospectus and any amendments thereof and supplements thereto as they relate to such Selling Shareholder and are based on information furnished to the Company by or on behalf of such Selling Shareholder expressly for use therein did not contain an untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. (h) The George Zimmer 1988 Living Trust (the "Zimmer Trust") hereby represents and warrants that all of the representations and warranties of the Company set forth in Section 1.A above are true and accurate. (i) Such Selling Shareholder (i) does not have any preemptive right, co-sale right or right of first refusal or other similar right to purchase any of the Shares that are to be sold by the Company or any of the other Selling Shareholders to the Underwriters pursuant to this Agreement, and (ii) does not own any warrants, options or similar rights to acquire, and does not have any right or arrangement to acquire, any capital stock, rights, warrants, options or other securities from the Company. (j) Such Selling Shareholder does not possess any registration rights with respect to any securities of the Company. 2. Purchase, Sale and Delivery of the Shares. On the basis of the representations, warranties, Covenants and agreements herein contained, but subject to the terms and conditions herein set forth, (i) the Company agrees to sell to the several Underwriters, and the Underwriters, severally and not jointly, agree to purchase from the Company, at $_______ per share, the number of Firm Shares set forth opposite the respective names of the Underwriters in Column (1) of Schedule I hereto, and (ii) the Selling Shareholders, severally and not jointly, agree to sell to the several Underwriters, and the Underwriters, severally and not jointly, agree to purchase from the Selling Shareholders, at $________ per share, the number of Firm Shares set forth opposite the respective names of the Underwriters in Column (2) of Schedule I hereto. The number of Firm Shares to be sold by each Selling Shareholder to each Underwriter shall be the number which bears the same proportion to the total number of Firm Shares to be sold by such Selling Shareholder, as specified in Schedule II hereto, as the number of Firm Shares set forth opposite the name of such Underwriter in Column (2) of Schedule I bears to the total -9- 10 number of Firm Shares to be sold by all Selling Shareholders, subject to such adjustments to eliminate any fractional shares as you in your sole discretion shall make. Delivery of certificates, and payment of the purchase price, for the Firm Shares shall be made at the offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, or such other location as may be mutually acceptable. Such delivery and payment shall be made at 10:00 a.m., New York time, on the fourth business day following the date the Registration Statement becomes effective (unless such time and date are postponed in accordance with the provisions of Section 9 hereof), or at such other time as shall be agreed upon by you, the Selling Shareholders and the Company. The time and date of such delivery and payment are herein called the "Closing Date." Delivery of the certificates for the Firm Shares shall be made to the several Underwriters, or to their representative for their respective accounts, against payment by the several Underwriters through their representative of the purchase price for the Firm Shares by wire transfer of next-day funds, to the accounts designated by the Company and the Selling Shareholders at least one business day before the Closing Date, or by certified or official bank checks, in next-day funds, payable to the order of the Company and each Selling Shareholder. Certificates for the Firm Shares shall be registered in such name or names and in such authorized denominations as you may request in writing at least two full business days prior to the Closing Date. The Company and the Selling Shareholders will permit you to examine and package such certificates for delivery at least one full business day prior to the Closing Date. In addition, the Selling Shareholders hereby grant to the several Underwriters the option to purchase up to 390,000 shares of Common Stock as the Additional Shares at the same purchase price per share to be paid by the several Underwriters to the Company and the Selling Shareholders for the Firm Shares as set forth in this Section 2, for the sole purpose of covering over-allotments in the sale of Firm Shares by the several Underwriters. This option may be exercised at any time (but not more than once) on or before the 30th day following the effective date of the Registration Statement, by written notice by you to the Selling Shareholders. Such notice shall set forth the aggregate number of Additional Shares as to which the option is being exercised and the date and time, as reasonably determined by you, when the Additional Shares are to be delivered (such date and time being herein sometimes referred to as the "Additional Closing Date"); provided, however, that the Additional Closing Date shall not be earlier than the Closing Date or earlier than the second full business day after the date on which the option shall have been exercised nor later than the eighth full business day after the date on which the option shall have been exercised (unless such time and date are postponed in accordance with the provisions of Section 9 hereof). Certificates for the Additional Shares shall be registered in such name or names and in such authorized denominations as you may request in writing at least two full business days prior to the Additional Closing Date. The Selling Shareholders will permit you to examine and package such certificates for delivery at least one full business day prior to the Additional Closing Date. The number of Additional Shares to be sold to each Underwriter shall be the number which bears the same ratio to the aggregate number of Additional Shares being purchased as -10- 11 the number of Firm Shares set forth opposite the name of such Underwriter in Column (2) of Schedule I hereto (or such number increased as set forth in Section 9 hereof) bears to the total number of Firm Shares, subject, however, to such adjustments to eliminate any fractional shares as you in your sole discretion shall make. If less than all of the Additional Shares are purchased, the Underwriters will purchase such Additional Shares from each Selling Shareholder in the same proportion as the number of Firm Shares sold by such Selling Shareholder bears to the total number of Firm Shares sold by all Selling Shareholders. The allocation of the Additional Shares to be sold by the Selling Shareholders shall be subject to such adjustments to eliminate any fractional shares as you in your sole discretion shall make. Payment for the Additional Shares shall be made by the several Underwriters through their representative by wire transfer of next-day funds, to the accounts designated by the Selling Shareholders at least one business day before the Additional Closing Date, or by certified or official bank check, in next-day funds, payable to the order of each Selling Shareholder at the offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, or such other location as may be mutually acceptable, upon delivery of the certificates for the Additional Shares to the Underwriters or to their representative for their respective accounts. 3. Offering. It is understood that after the Registration Statement becomes effective, the Underwriters propose to offer the Shares for sale to the public as set forth in the Prospectus. 4. Covenants of the Company and the Selling Shareholders. A. The Company covenants and agrees with the several Underwriters that: (a) The Company will use its reasonable best efforts to cause the Registration Statement and any amendment thereof to become effective as promptly as possible and will notify you immediately (i) when the Registration Statement and any amendments thereto become effective, (ii) of any request by the Commission for any amendment of or supplement to the Registration Statement or the Prospectus or for any additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or of the initiation, or the threatening, of any proceedings therefor, (iv) of the receipt of any comments from the Commission, and (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for that purpose. If the Commission shall propose or enter a stop order at any time, the Company will make every reasonable effort to prevent the issuance of any such stop order and, if issued, to obtain the lifting of such order as soon as possible. (b) The Company will not file at any time, whether before or after the effective date of the Registration Statement, any amendment to the Registration Statement or any amendment of or supplement to the Prospectus unless (i) you shall have been provided a copy of such proposed amendment or supplement within a -11- 12 reasonable time before the proposed filing, (ii) such proposed amendment or supplement complies in all material respects with the Act and the Regulations, and (iii) you shall have provided your consent to such proposed filing, which consent shall not be unreasonably withheld. (c) If at any time when a prospectus relating to the Shares is required to be delivered under the Act, any event shall have occurred as a result of which the Prospectus as then amended or supplemented includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it shall be necessary at any time to amend or supplement the Prospectus or Registration Statement to comply with the Act or the Regulations, or to file under the Exchange Act so as to comply therewith any document incorporated by reference in the Registration Statement or the Prospectus or in any amendment thereof or supplement thereto, the Company will notify you promptly and prepare and file with the Commission an appropriate amendment or supplement (in form and substance satisfactory to you) which will correct such statement or omission or which will effect such compliance and will use its reasonable best efforts to have any amendment to the Registration Statement declared effective as soon as possible. (d) The Company will promptly deliver to each of you two copies of the executed Registration Statement, including exhibits and all documents incorporated by reference therein and all amendments thereto, and the Company will promptly deliver to each of the Underwriters such number of copies of any Preliminary Prospectus, the Prospectus, the Registration Statement, and all documents incorporated by reference in the Registration Statement and Prospectus or any amendment thereof or supplement thereto, without exhibits, if any, as you may reasonably request. (e) The Company will endeavor in good faith, in cooperation with you, at or prior to the time the Registration Statement becomes effective, to qualify the Shares for offering and sale under the securities laws relating to the offering or sale of the Shares in such jurisdictions as you may designate and to maintain such qualification in effect for so long as required for the distribution thereof; provided, however, the Company shall not be obligated under this subsection (e) to qualify as a foreign corporation to do business under the laws of any jurisdiction in which it is not qualified as of the date of this Agreement. (f) The Company will make generally available (within the meaning of Section 11(a) of the Act) to its security holders and to you as soon as practicable, but not later than 45 days after the end of its fiscal quarter in which the first anniversary date of the effective date of the Registration Statement occurs, an earnings statement (which need not be audited, but which shall satisfy the provisions of Section 11(a) of the Act) covering a period of at least twelve consecutive months beginning after the effective date of the Registration Statement. -12- 13 (g) During a period of 90 days from the effective date of the Registration Statement, the Company will not, without your prior written consent, issue, sell, offer or agree to sell, or otherwise dispose of, directly or indirectly, any Common Stock (or any securities convertible into, exercisable for or exchangeable for Common Stock), and the Company will obtain the undertaking of each of its officers and directors not to engage in any of the aforementioned transactions on the Company's behalf, other than (i) the sale of Shares hereunder or the Company's issuance of Common Stock upon the exercise of presently outstanding stock options, (ii) sales of Common Stock to the Company's Employee Stock Plan, consistent with past practices of the Company, and (iii) issuances of options to purchase Common Stock under the Company's employee and non-employee director stock option plans in effect on the date hereof, provided such options are not exercisable within such 90-day period. In addition, notwithstanding anything to the contrary contained herein, during the period of 90 days from the effective date of the Registration Statement, the Company will not agree, without your prior written consent, with any holder of options to purchase Common Stock to amend or modify any such options, or take any other actions, to provide for such options to become exercisable within such 90-day period. (h) During a period of three years from the effective date of the Registration Statement, the Company will furnish to you copies of (i) all reports to its shareholders; and (ii) all reports, financial statements and proxy or information statements filed by the Company with the Commission, any national securities exchange or the National Association of Securities Dealers, Inc. ("NASD"). (i) The Company will apply the net proceeds available to it from the sale of the Shares as set forth under "Use of Proceeds" in the Prospectus. B. Each Selling Shareholder covenants and agrees with the several Underwriters that: (a) During a period of 90 days from the effective date of the Registration Statement, no Selling Shareholder (including such Selling Shareholder's successors, assigns, heirs and legatees) will, without your prior written consent, sell, offer or agree to sell, or otherwise dispose of, directly or indirectly, any Common Stock other than such Selling Shareholder's Shares in accordance with the terms of this Agreement and except that the Zimmer family foundation shall not be subject to such restrictions on transfer. Except as otherwise expressly provided in the immediately preceding sentence, such Selling Shareholder agrees and consents to the entry of stop-transfer instructions with the Company's transfer agent against the transfer of shares of Common Stock held by such Selling Shareholder during such 90-day period without your prior written consent. (b) Such Selling Shareholder will advise the Attorney-in-Fact before the Closing Date or the Additional Closing Date, as the case may be, if any statement to be made on behalf of such Selling Shareholder in the certificate contemplated by Section -13- 14 6(f) would be inaccurate if made as of the Closing Date or the Additional Closing Date, as the case may be. (c) Such Selling Shareholder will cooperate with the Company in endeavoring to qualify the Shares for offering and sale under the securities laws relating to the offering or sale of the Shares of such jurisdictions as you may designate and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose. 5. Payment of Expenses. Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Company agrees to pay all costs and expenses incident to the performance of the obligations of the Company and the Selling Shareholders hereunder, including those in connection with (i) preparing, printing, duplicating, filing and distributing the Registration Statement, as originally filed and all amendments thereof (including all exhibits thereto), any Preliminary Prospectus, the Prospectus and any amendments thereof or supplements thereto, the underwriting documents (including this Agreement) and all other documents related to the public offering of the Shares (including those supplied to the Underwriters in quantities as hereinabove stated), (ii) the issuance, transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) the qualification of the Shares under state or foreign securities or Blue Sky laws, including the costs of printing and mailing a preliminary and final "Blue Sky Survey" and the fees of counsel for the Underwriters and such counsel's disbursements in relation thereto, (iv) the inclusion of the Shares in the Nasdaq National Market, (v) the filing fees for the review of the terms of the public offering of the Shares by the NASD, (vi) the cost of printing certificates representing the Shares, and (vii) all other costs and expenses incident to the performance of the Company's and the Selling Shareholders' obligations hereunder and not otherwise specifically provided for in this Section. 6. Conditions of Underwriters' Obligations. The obligations of the several Underwriters to purchase and pay for the Firm Shares and the Additional Shares, as provided herein, shall be subject to the accuracy of the representations and warranties of the Company and the Selling Shareholders herein contained, as of the date hereof and as of the Closing Date (or in the case of the Additional Shares, as of the Additional Closing Date), to the absence from any certificates, opinions, written statements or letters furnished to you or to Gardere & Wynne, L.L.P. ("Underwriters' Counsel") pursuant to this Section 6 of any misstatement or omission, to the performance by the Company and the Selling Shareholders of their obligations hereunder, and to the following additional conditions: (a) The Registration Statement shall have become effective not later than 5:00 p.m., New York time, on the date of this Agreement or at such later time and date as shall have been consented to in writing by you, and, at or prior to the Closing Date or the Additional Closing Date, as the case may be, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereof shall have been issued and no proceedings therefor shall have been initiated or threatened by the Commission. -14- 15 (b) At the Closing Date and the Additional Closing Date, if any, you shall have received the opinion of Fulbright & Jaworski L.L.P., counsel for the Company, dated the Closing Date or the Additional Closing Date, as the case may be, addressed to the Underwriters and in form and substance satisfactory to Underwriters' Counsel, to the effect that: (i) Each of the Company and the Corporate Subsidiaries has been duly organized and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation. Each of the Company and the Corporate Subsidiaries is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing that will not in the aggregate have a material adverse effect on the Company and the Corporate Subsidiaries taken as a whole. Each of the Company and the Corporate Subsidiaries has all requisite corporate power and authority to own, lease and license its respective properties and conduct its business as described in the Registration Statement and the Prospectus. (ii) All of the issued and outstanding shares of capital stock of the Corporate Subsidiaries have been duly and validly issued and are fully paid and nonassessable and free of statutory preemptive rights and, to the knowledge of such counsel, are free of any other preemptive rights and are owned by the Company, free and clear of any adverse claim within the meaning of the Uniform Commercial Code, as in effect in the State of New York (the "UCC"), and to the knowledge of such counsel, there are no outstanding options, warrants, or other rights to purchase, or securities convertible into or exchangeable for, shares of capital stock of any Corporate Subsidiary. TMW Texas Retail, L.P., a Texas limited partnership, has been duly formed and is validly existing as a limited partnership under the Texas Revised Limited Partnership Act, as amended, with partnership power and authority to own the properties it currently owns and to conduct the business it currently conducts. (iii) The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectus under the caption "Description of Capital Stock" as of the date stated therein. All of the issued and outstanding shares of Common Stock have been duly and validly authorized and issued, are fully paid and nonassessable and were not issued in violation of any statutory preemptive rights, and to the knowledge of such counsel, were not issued in violation of any other preemptive rights, co-sale right, right of first refusal or other similar right. (iv) The Shares to be issued and sold by the Company to the Underwriters pursuant to this Agreement have been duly and validly authorized and, upon issuance and delivery against payment therefor in accordance with this -15- 16 Agreement, will be duly and validly issued, fully paid and nonassessable and will not have been issued in violation of any statutory preemptive rights, and to the knowledge of such counsel, any other preemptive rights, co-sale right, right of first refusal, or other similar right. (v) The terms and provisions of the capital stock of the Company conform in all material respects to the description thereof contained in the Registration Statement and the Prospectus. (vi) The information in the Prospectus under the caption "Description of Capital Stock," to the extent it constitutes matters of law or legal conclusions, has been reviewed by such counsel and is correct in all material respects. (vii) This Agreement has been duly and validly authorized, executed and delivered by the Company and is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that (1) rights to indemnity hereunder may be limited by federal or state securities laws or public policy underlying such laws, (2) such enforcement may be subject to applicable federal or state bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws or court decisions relating to or affecting creditors' rights generally and (3) such enforcement may be limited by equitable principles of general applicability, including without limitation concepts of materiality, reasonableness, good faith and fair dealing, equitable subordination and the possible unavailability of specific performance or injunctive relief (regardless of whether considered in a proceeding in equity or at law or whether codified by statute). (viii) The execution and delivery of this Agreement by the Company, the issuance and sale of the Shares by the Company, the performance of the Company's obligations under this Agreement and the consummation of the transactions contemplated hereby by the Company will not (1) result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) or require consent under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary pursuant to the terms of any agreement or instrument filed as an exhibit to the Registration Statement or any other agreement, instrument, franchise, license or permit to which the Company or any Subsidiary is a party or by which any of such entities or their respective properties or assets may be bound and identified to such counsel as being material and set forth on an exhibit to such opinion, or (2) violate any provision of the articles or certificate of incorporation, bylaws or partnership agreement, as the case may be, of the Company or any Subsidiary, or, to the knowledge of such counsel, any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or -16- 17 body having jurisdiction over the Company or any Subsidiary or any of their respective properties or assets; provided, however, that no opinion need be rendered concerning state securities or Blue Sky laws. (ix) To the knowledge of such counsel, no consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any Subsidiary or any of their respective properties or assets is required for the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, except for (1) such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters (as to which such counsel need express no opinion), and (2) such as have been made or obtained under the Act. (x) To the knowledge of such counsel, (1) there is no litigation or governmental or other action, suit, proceeding or investigation before any court or before or by any public, regulatory or governmental agency or body pending or threatened against, or involving the properties or business of, the Company or any Subsidiary which is of a character required to be disclosed in the Registration Statement and the Prospectus and which has not been properly disclosed therein, and (2) there are no statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required. (xi) To the knowledge of such counsel, except as set forth in the Registration Statement and the Prospectus, no holders of Common Stock or other securities of the Company have registration rights with respect to the securities of the Company and all holders of securities of the Company having rights to registration of shares of Common Stock, or other securities, as a result of the filing of the Registration Statement have, with respect to the offering contemplated thereby, waived such rights or such rights have expired by reason of lapse of time following notification of the Company's intent to file the Registration Statement, or have included securities in the Registration Statement pursuant to the exercise of such rights. (xii) The Registration Statement has become effective under the Act, and, to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereof has been issued and no proceedings therefor have been initiated or threatened by the Commission. (xiii) As of the effective date of the Registration Statement, the Registration Statement and the Prospectus and any amendments thereof or -17- 18 supplements thereto (other than the financial statements and schedules and other financial and statistical data included therein, as to which such counsel need express no opinion) complied as to form in all material respects with the requirements of the Act and the Regulations. The documents filed under the Exchange Act and incorporated by reference in the Registration Statement and the Prospectus and in any amendment thereof or supplement thereto (other than the financial statements and schedules and other financial and statistical data included or incorporated by reference therein, as to which no opinion need be rendered) comply as to form in all material respects with the Exchange Act and the rules and regulations of the Commission thereunder. In addition, such counsel shall state that, although they assume no responsibility for the accuracy or completeness of the statements in the Registration Statement and the Prospectus, they have participated in the preparation of the Registration Statement and Prospectus and in conferences with officers and other representatives of the Company, Underwriters' Counsel, representatives of the independent public accountants for the Company and your representatives at which the contents of the Registration Statement and Prospectus were discussed, and that, although they are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and the Prospectus (or any amendment thereof or supplement thereto prior to the Closing Date or the Additional Closing Date, as the case may be, as of the date of such amendment or supplement), on the basis of the foregoing (relying as to materiality to a large degree upon the opinions of officers and other representatives of the Company), no facts have come to their attention that lead them to believe that either (1) the Registration Statement, as of the time it became effective (or any amendment thereto made prior to the Closing Date or the Additional Closing Date, as the case may be, as of the date of such amendment), contained or as of the Closing Date or the Additional Closing Date, as the case may be, contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (2) the Prospectus, as of the date thereof (or any amendment thereof or supplement thereto made prior to the Closing Date or the Additional Closing Date, as the case may be, as of the date of such amendment or supplement), contained or as the Closing Date or the Additional Closing Date, as the case may be, contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except with respect to the financial statements or schedules or other financial or statistical data included in the Registration Statement or the Prospectus as to which such counsel need express no opinion). In rendering its opinion hereunder, such counsel may rely: (A) as to matters of fact, on certificates of responsible officers of the Company and certificates or other written statements of officers of departments of various jurisdictions having custody of documents regarding the corporate or limited partnership existence or good standing of -18- 19 the Company and the Subsidiaries, provided that copies of any such statements or certificates shall be delivered to Underwriters' Counsel; and (B) as to matters involving the application of laws other than the laws of the United States and the States of California, New York and Texas, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters' Counsel and familiar with the applicable laws. The opinion of such counsel for the Company shall state that the opinion of any such other counsel is in form satisfactory to such counsel for the Company and, in their opinion, you and they are justified in relying thereon. A copy of the opinion of any such other counsel shall be attached to the opinion of such counsel for the Company. The opinion shall also state that as used therein, the qualification "to the knowledge of such counsel" does not indicate or imply that counsel rendering the opinion have not conducted such review as they, in their professional judgment, have deemed necessary or appropriate to render such opinion, but does indicate that such counsel have relied upon factual certificates, representations and information from the Company and its representatives having such scope and form as counsel have deemed appropriate. (c) At the Closing Date and the Additional Closing Date, if any, you shall have received the favorable opinion of Fulbright & Jaworski L.L.P., counsel for the Selling Shareholders other than the Zimmer Trust, dated the Closing Date or the Additional Closing Date, as the case may be, addressed to the Underwriters and in form and substance satisfactory to Underwriters' Counsel, to the effect that: (i) This Agreement and the Custody Agreement have been duly executed and delivered by or on behalf of each such Selling Shareholder and is a valid and binding obligation of each such Selling Shareholder, enforceable against such Selling Shareholder in accordance with its terms, except to the extent that (1) rights to indemnity hereunder may be limited by applicable federal or state securities laws or the public policy underlying such laws, (2) such enforcement may be subject to applicable federal or state bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws or court decisions relating to or affecting creditors' rights generally, and (3) such enforcement may be limited by equitable principles of general applicability, including concepts of materiality, reasonableness, good faith and fair dealing, equitable subordination and the possible unavailability of specific performance or injunctive relief (regardless of whether considered in a proceeding in equity or at law or whether codified by statute). (ii) To the knowledge of such counsel, each such Selling Shareholder that is not a natural person has the requisite power and authority to enter into and to perform its obligations under this Agreement and the Custody Agreement and to sell, transfer, assign and deliver the Shares to be sold by such Selling Shareholder pursuant hereto. -19- 20 (iii) To the knowledge of such counsel, no consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses or permits are required for the execution, delivery and performance of this Agreement and the Custody Agreement, and the consummation of the transactions contemplated hereby by any such Selling Shareholder, except for (1) such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters (as to which such counsel need express no opinion), and (2) such as have been made or obtained under the Act. (iv) To the knowledge of such counsel, upon the delivery of and payment for the Shares to be sold by such Selling Shareholders pursuant to this Agreement as herein contemplated, and assuming each Underwriter takes delivery without knowledge of any adverse claims, such Underwriter will be a bona fide purchaser with respect to such Shares within the meaning of Article 8 of the UCC and will acquire all rights of such Selling Shareholder in such Shares, free and clear of all adverse claims. (v) The statements in the Prospectus under the caption "Selling Shareholders," insofar as such statements refer to such Selling Shareholders and constitute a summary of the matters referred to therein, fairly present the information required to be presented by the Act or the Regulations. In rendering its opinion hereunder, such counsel may rely: (A) as to matters of fact, on certificates of such Selling Shareholders, provided that copies of any such certificates shall be delivered to Underwriters' Counsel; and (B) as to matters involving the application of laws other than the laws of the United States and the States of California, New York and Texas, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters' Counsel and familiar with the applicable laws. The opinion of such counsel for such Selling Shareholders shall state that the opinion of any such other counsel is in form satisfactory to such counsel for such Selling Shareholders and, in their opinion, you and they are justified in relying thereon. A copy of the opinion of any such other counsel shall be attached to the opinion of such counsel for such Selling Shareholders. The opinion shall also state that as used therein, the qualification "to the knowledge of such counsel" does not indicate or imply that counsel rendering the opinion have not conducted such review as they, in their professional judgment, have deemed necessary or appropriate to render such opinion, but does indicate that such counsel have relied upon factual certificates, representations and information from such Selling Shareholders and their representatives having such scope and form as counsel have deemed appropriate. (d) At the Closing Date and the Additional Closing Date, if any, you shall have received the favorable opinion of Cooley, Godward, Castro, Huddleston & Tatum, counsel for the Zimmer Trust, dated the Closing Date or the Additional Closing -20- 21 Date, as the case may be, addressed to the Underwriters and in form and substance satisfactory to Underwriters' Counsel, to the effect that: (i) This Agreement and the Custody Agreement have been duly executed and delivered by or on behalf of such Selling Shareholder and is a valid and binding obligation of such Selling Shareholder, enforceable against such Selling Shareholder in accordance with its terms, except to the extent that (1) rights to indemnity hereunder may be limited by applicable federal or state securities laws or the public policy underlying such laws, (2) such enforcement may be subject to applicable federal or state bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws or court decisions relating to or affecting creditors' rights generally, and (3) such enforcement may be limited by equitable principles of general applicability, including concepts of materiality, reasonableness, good faith and fair dealing, equitable subordination and the possible unavailability of specific performance or injunctive relief (regardless of whether considered in a proceeding in equity or at law or whether codified by statute). (ii) To the knowledge of such counsel, such Selling Shareholder has the requisite power and authority to enter into and to perform its obligations under this Agreement and the Custody Agreement and to sell, transfer, assign and deliver the Shares to be sold by such Selling Shareholder pursuant hereto. (iii) To the knowledge of such counsel, no consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses or permits are required for the execution, delivery and performance of this Agreement and the Custody Agreement, and the consummation of the transactions contemplated hereby by such Selling Shareholder, except for (1) such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters (as to which such counsel need express no opinion), and (2) such as have been made or obtained under the Act. (iv) To the knowledge of such counsel, upon the delivery of and payment for the Shares to be sold by such Selling Shareholder pursuant to this Agreement as herein contemplated, and assuming each Underwriter takes delivery without knowledge of any adverse claims, such Underwriter will be a bona fide purchaser with respect to such Shares within the meaning of Article 8 of the UCC and will acquire all rights of such Selling Shareholder in such Shares, free and clear of all adverse claims. (v) The statements in the Prospectus under the caption "Selling Shareholders," insofar as such statements refer to such Selling Shareholder and constitute a summary of the matters referred to therein, fairly present the information required to be presented by the Act or the Regulations. -21- 22 In rendering its opinion hereunder, such counsel may rely: (A) as to matters of fact, on certificates of such Selling Shareholder, provided that copies of any such certificates shall be delivered to Underwriters' Counsel; and (B) as to matters involving the application of laws other than the laws of the United States and the State of California, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters' Counsel and familiar with the applicable laws. The opinion of such counsel for such Selling Shareholder shall state that the opinion of any such other counsel is in form satisfactory to such counsel for such Selling Shareholder and, in their opinion, you and they are justified in relying thereon. A copy of the opinion of any such other counsel shall be attached to the opinion of such counsel for such Selling Shareholder. The opinion shall also state that as used therein, the qualification "to the knowledge of such counsel" does not indicate or imply that counsel rendering the opinion have not conducted such review as they, in their professional judgment, have deemed necessary or appropriate to render such opinion, but does indicate that such counsel have relied upon factual certificates, representations and information from such Selling Shareholder and its representatives having such scope and form as counsel have deemed appropriate. (e) At the Closing Date and the Additional Closing Date, if any, you shall have received a certificate of the President and the Chief Operating and Financial Officer of the Company, dated the Closing Date or the Additional Closing Date, as the case may be, to the effect that the condition set forth in subsection (a) of this Section 6 has been satisfied, that as of the date hereof and as of the Closing Date or the Additional Closing Date, as the case may be, the representations and warranties of the Company set forth in Section 1 hereof are accurate, and that as of the Closing Date or the Additional Closing Date, as the case may be, the obligations of the Company to be performed hereunder on or prior thereto have been duly performed. (f) At the Closing Date and the Additional Closing Date, if any, you shall have received a certificate executed by the Attorney-in-Fact on behalf of the Selling Shareholders, dated the Closing Date or the Additional Closing Date, as the case may be, to the effect that the representations and warranties of such Selling Shareholders set forth in Section 1 hereof are accurate, and that as of the Closing Date, the obligations of such Selling Shareholders to be performed hereunder on or prior thereto have been duly performed. (g) At the time this Agreement is executed and at the Closing Date and the Additional Closing Date, if any, you shall have received a letter, from Deloitte & Touche LLP, independent public accountants for the Company, dated as of the date of this Agreement and as of the Closing Date or the Additional Closing Date, as the case may be, addressed to the Underwriters and in form and substance satisfactory to you, to the effect that: (i) they are independent certified public accountants with respect to the Company within the meaning of the Act and the applicable published rules and regulations of the Commission thereunder and stating that the answer to Item 10 of the Registration Statement is correct insofar as it relates to them; (ii) in their opinion, the financial statements of the Company incorporated by reference in the Registration Statement and the Prospectus and covered by their opinion therein comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the applicable published rules and -22- 23 regulations of the Commission thereunder; (iii) on the basis of procedures (but not an examination made in accordance with generally accepted auditing standards) consisting of a reading of the latest available unaudited interim consolidated financial statements of the Company and the Subsidiaries, a reading of the minutes of meetings and consents of the shareholders and boards of directors or the partners (as the case may be) of the Company and the Subsidiaries and the committees of such boards subsequent to February 1, 1997, inquiries of officers and other employees or partners (as the case may be) of the Company and the Subsidiaries who have responsibility for financial and accounting matters of the Company and the Subsidiaries with respect to transactions and events subsequent to February 1, 1997, and other specified procedures and inquiries to a date not more than five days prior to the date of such letter, nothing has come to their attention that would cause them to believe that: (A) with respect to the period subsequent to February 1, 1997 there were, as of the date of the most recent available monthly consolidated financial statements of the Company and the Subsidiaries, if any, and as of a specified date not more than five days prior to the date of such letter, any changes in the capital stock or long-term indebtedness of the Company or any decrease in the net current assets or shareholders' equity of the Company, in each case as compared with the amounts shown in the most recent balance sheet incorporated by reference in the Registration Statement and the Prospectus, except for changes or decreases which the Registration Statement and the Prospectus disclose have occurred or may occur or which are set forth in such letter, or (B) that during the period after February 1, 1997 to the date of the most recent available monthly consolidated financial statements of the Company and the Subsidiaries, if any, and to a specified date not more than five days prior to the date of such letter, there was any decrease, as compared with the corresponding period in the prior fiscal year of the Company, in total revenues, or total or per share net income, except for decreases which the Registration Statement and the Prospectus disclose have occurred or may occur or which are set forth in such letter; and (iv) stating that they have compared specific dollar amounts, numbers of shares, percentages of revenues and earnings, and other financial information pertaining to the Company and the Subsidiaries set forth or incorporated by reference in the Registration Statement and the Prospectus, which have been specified by you prior to the date of this Agreement, to the extent that such amounts, numbers, percentages, and information may be derived from the general accounting and financial records of the Company and the Subsidiaries or from schedules furnished by the Company, and excluding any questions requiring an interpretation by legal counsel, with the results obtained from the application of specified readings, inquiries, and other appropriate procedures specified by you (which procedures do not constitute an examination in accordance with generally accepted auditing standards) set forth in such letter, and found them to be in agreement. In addition, you shall have received from Deloitte & Touche LLP a letter addressed to the Company and made available to you for use of the Underwriters stating that their review of the Company's system of internal -23- 24 accounting controls, to the extent they deemed necessary in establishing the scope of their examination of the Company's consolidated financial statements for the fiscal year ended February 1, 1997, did not disclose any weaknesses in internal controls that they considered to be material weaknesses. (h) All proceedings taken in connection with the sale of the Firm Shares and the Additional Shares as herein contemplated shall be satisfactory in form and substance to you and to Underwriters' Counsel, and the Underwriters shall have received from Underwriters' Counsel a favorable opinion, dated as of the Closing Date and the Additional Closing Date, as the case may be, with respect to the issuance and sale of the Shares, the Registration Statement and the Prospectus and such other related matters, as you may reasonably require, and the Company and the Selling Shareholders shall have furnished to Underwriters' Counsel such documents as Underwriters' Counsel request for the purpose of enabling them to pass upon such matters. (i) Prior to the Closing Date and the Additional Closing Date, the Company and the Selling Shareholders shall have furnished to you such further information, certificates and documents as you may reasonably request. If any of the conditions specified in this Section 6 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to you or to Underwriters' Counsel pursuant to this Section 6 shall not be in all material respects reasonably satisfactory in form and substance to you and to Underwriters' Counsel, all obligations of the Underwriters hereunder may be cancelled by you at, or at any time prior to, the Closing Date and the obligations of the Underwriters to purchase the Additional Shares may be cancelled by you at, or at any time prior to, the Additional Closing Date. Notice of such cancellation shall be given to the Company and the Selling Shareholders in writing, or by telephone, telex or telegraph, confirmed in writing. 7. Indemnification. (a) The Company and the Zimmer Trust, jointly and severally, agree to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all losses, liabilities, claims, damages and expenses whatsoever (including attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, as originally filed or any amendment thereof, or any Preliminary Prospectus or the Prospectus, or in any supplement thereto or amendment thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact -24- 25 required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company and the Zimmer Trust will not be liable in any such case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through you expressly for use therein, and the indemnification obligation of the Zimmer Trust will be limited in amount to the proceeds actually received by it from the sale of its Shares pursuant to this Agreement; and provided further, that the indemnification rights in this Section 7(a) with respect to any Preliminary Prospectus shall not inure to the benefit of any Underwriter (or to the benefit of any person controlling such Underwriter) on account of any such loss, liability, claim, damage or expense arising from the sale of Shares by such Underwriter to any person if a copy of the Prospectus, as amended or supplemented, shall not have been delivered or sent to such person within the time required by the Act, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in such Preliminary Prospectus was corrected in the Prospectus, as amended or supplemented, provided that the Company delivered the Prospectus, as amended or supplemented, to the several Underwriters on a timely basis to permit such delivery or sending. This indemnity agreement will be in addition to any liability which the Company or the Zimmer Trust may otherwise have, including under this Agreement. (b) Each Underwriter severally, and not jointly, agrees to indemnify and hold harmless the Company, each of the directors of the Company, each of the officers of the Company who shall have signed the Registration Statement, each Selling Shareholder, and each other person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever (including attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, as originally filed or any amendment thereof, or any Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through the Underwriters' representative expressly for use therein. This indemnity will be in addition to any liability which any Underwriter may otherwise have, including under this Agreement. The Company acknowledges that the statements set forth in the last paragraph of the cover page and in the first three -25- 26 paragraphs and the last sentence of the fifth paragraph under the caption "Underwriting" in the Prospectus constitute the only information furnished in writing by or on behalf of any Underwriter expressly for use in the Registration Statement, as originally filed or in any amendment thereof, any Preliminary Prospectus or the Prospectus or in any amendment thereof or supplement thereto, as the case may be. (c) Each Selling Shareholder, severally and not jointly (in the proportion that the number of Shares sold by such Selling Shareholder bears to the total number of Shares sold pursuant hereto), agrees to indemnify and hold harmless each Underwriter, the Company, each of the directors of the Company, each of the officers of the Company who shall have signed the Registration Statement, and each other person, if any, who controls the Company or any Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever (including attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, as originally filed or any amendment thereof, or any Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information relating to such Selling Shareholder furnished to the Company by such Selling Shareholder, directly or through such Selling Shareholder's representative, expressly for use therein. This indemnity will be in addition to any liability which any such Selling Shareholder may otherwise have, including under this Agreement. (d) Promptly after receipt by an indemnified party under subsection (a), (b), or (c) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement thereof (but the failure so to notify an indemnifying party shall not relieve it from any liability which it may have under this Section 7 except to the extent that it has been prejudiced in any material respect by such failure or from any liability which it may have otherwise). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel -26- 27 satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by one of the indemnifying parties in connection with the defense of such action, in which case such indemnifying party only shall be responsible for such fees and expenses, (ii) the indemnifying parties shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties with respect to such defenses), in any of which events such fees and expenses shall be borne by the indemnifying parties; provided, however, that the indemnifying parties shall, in connection with any one such action or separate actions substantially similar or related actions arising out of the same general allegations or circumstances, be liable for the fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such indemnified parties, which firm, in the case of the Underwriters and controlling persons, shall be designated by all of the Underwriters and, in the case of the Company, the Selling Shareholders, and the officers, directors and controlling persons of the Company, shall be designated by the Company. Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent; provided, however, that such consent was not unreasonably withheld. 8. Contribution. In order to provide for contribution in circumstances in which the indemnification provided for in Section 7 hereof is for any reason held to be unavailable from any indemnifying party or is insufficient to hold harmless a party indemnified thereunder, the Company, the Selling Shareholders, and the Underwriters shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provisions (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company and any Selling shareholder any contribution received by the Company or such Selling Shareholder from persons, other than the Underwriters, who may also be liable for contribution, including persons who control the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, officers of the Company who signed the Registration Statement and directors of the Company) to which the Company, one or more of the Selling Shareholders, and one or more of the Underwriters may be subject, in such proportions as is appropriate to reflect the relative benefits received by the Company, the Selling Shareholders, and the Underwriters from the offering of the Shares or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the indemnifying party not having received notice as provided in Section 7 hereof, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company, the Selling Shareholders, and the Underwriters in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, -27- 28 as well as any other relevant equitable considerations. The relative benefits received by the Company, the Selling Shareholders, and the Underwriters shall be deemed to be in the same proportion as (x) the total proceeds from the offering (net of underwriting discounts and commissions, but before deducting expenses) received by the Company, (y) the total proceeds from the offering (net of underwriting discounts and commissions, but before deducting expenses) received by the Selling Shareholders and (z) the underwriting discounts and commissions received by the Underwriters, respectively, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company, of the Selling Shareholders, and of the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Selling Shareholders, or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Selling Shareholders, and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this Section 8, (i) in no case shall any Underwriter (except as may be provided in the Agreement Among Underwriters) be liable or responsible for any amount in excess of the underwriting discount applicable to the Shares purchased by such Underwriter hereunder, (ii) in no case shall any Selling Shareholder be liable or responsible for any amount that exceeds the proceeds actually received by that Selling Shareholder from the sale of his, her, or its Shares pursuant to this Agreement, and (iii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as such Underwriter, each person, if any, who controls a Selling Shareholder within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as such Selling Shareholder, and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to clauses (i), (ii), and (iii) of the immediately preceding sentence of this Section 8. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 8, notify such party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 8 or otherwise. No party shall be liable for contribution with respect to any action or claim settled without its consent; provided, however, that such consent was not unreasonably withheld. -28- 29 9. Default by an Underwriter. (a) If any Underwriter or Underwriters shall default in its or their obligation to purchase Firm Shares or Additional Shares hereunder, and if the Firm Shares or the Additional Shares with respect to which such default relates do not (after giving effect to arrangements, if any, made by you pursuant to subsection (b) of this Section 9) exceed in the aggregate 10% of the number of Firm Shares or Additional Shares, as the case may be, which all Underwriters have agreed to purchase hereunder, then such Firm Shares or Additional Shares to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to the respective proportions which the numbers of Firm Shares set forth opposite their respective names in Column (1) of Schedule I hereto bear to the aggregate number of Firm Shares set forth opposite the names of the non- defaulting Underwriters. (b) In the event that such default relates to more than 10% of the number of the Firm Shares or the Additional Shares, as the case may be, you may in your discretion arrange for yourself or for another party or parties (including any non-defaulting Underwriter or Underwriters who so agree) to purchase such Firm Shares or Additional Shares, as the case may be, to which such default relates on the terms contained herein. In the event that within five calendar days after such a default you do not arrange for the purchase of the Firm Shares or the Additional Shares, as the case may be, to which such default relates as provided in this Section 9, this Agreement or, in the case of a default with respect to the Additional Shares, the obligations of the Underwriters to purchase and of the Selling Shareholders to sell the Additional Shares shall thereupon terminate, without liability on the part of the Company or the Selling Shareholders with respect thereto (except in each case as provided in Sections 5, 7(a), 7(c), and 8 hereof) or the several Underwriters (except as provided in Section 7(b) and 8 hereof), but nothing in this Agreement shall relieve a defaulting Underwriter or Underwriters of its or their liability, if any, to the other several Underwriters, the Company, and the Selling Shareholders for damages occasioned by its or their default hereunder. (c) In the event that the Firm Shares or Additional Shares to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, you or the Company shall have the right to postpone the Closing Date, or you or the Selling Shareholders jointly shall have the right to postpone the Additional Closing Date, as the case may be, for a period, not exceeding five business days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment or supplement to the Registration Statement or the Prospectus which, in the opinion of Underwriters' Counsel, may thereby be made necessary or advisable. The term "Underwriter" as used in this Agreement shall include any party substituted under this Section 9 with like effect as if it had originally been a party to this Agreement with respect to such Firm Shares and Additional Shares. -29- 30 10. Survival of Representations and Agreements. All representations and warranties, covenants and agreements of the Underwriters, the Company, and the Selling Shareholders contained in this Agreement, including the agreements contained in Section 5, the indemnity agreements contained in Section 7 and the contribution agreements contained in Section 8, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any controlling person thereof, by or on behalf of the Company, any of its officers and directors or any controlling person thereof, or by or on behalf of any Selling Shareholder or any controlling person thereof, and shall survive delivery of and payment for the Shares to and by the several Underwriters. The representations contained in Section 1 and the agreements contained in Sections 5, 7, 8 and 11(d) hereof shall survive the termination of this Agreement including pursuant to Section 9 or Section 11 hereof. 11. Effective Date of Agreement; Termination. (a) This Agreement shall become effective at such time after notification of the effectiveness of the Registration Statement as you, the Company, and the Selling Shareholders shall agree upon the initial public offering price and the purchase price per Share. If either the initial public offering price or the purchase price per Share has not been agreed upon prior to 5:00 p.m., New York time, on the seventh full business day after the Registration Statement shall have become effective, this Agreement shall thereupon terminate without liability to the Company, the Selling Shareholders, or the Underwriters except as herein expressly provided. Until this Agreement becomes effective as aforesaid, it may be terminated (i) by the Company by notifying you and the Selling Shareholders, (ii) by the Selling Shareholders by their joint action directly or by the Attorney-in-Fact on behalf of all of the Selling Shareholders by notifying the Company and you, or (iii) by you or by your representative on behalf of all of you by notifying the Company and the Selling Shareholders. Notwithstanding the foregoing, the provisions of this Section 11 and of Sections 1, 5, 7 and 8 hereof shall at all times be in full force and effect. (b) You shall have the right to terminate this Agreement at any time prior to the Closing Date or the obligations of the Underwriters to purchase the Additional Shares at any time prior to the Additional Closing Date, as the case may be, if any domestic or international event or act or occurrence has materially disrupted, or in your opinion will in the immediate future materially disrupt, securities markets; or if trading on the New York or American Stock Exchanges shall have been suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the New York or American Stock Exchanges by the New York or American Stock Exchanges or by order of the Commission or any other governmental authority having jurisdiction; or if the United States shall have become involved in a war or major hostilities; or if a banking moratorium has been declared by a state or federal authority, or if a moratorium in foreign exchange trading by major international banks or persons has been declared; or if any new restriction materially adversely affecting the distribution of the Firm Shares or the Additional Shares, as the case may be, shall have become effective; or if there shall have been such change in the market for the -30- 31 Company's securities or securities in general or in political, financial or economic conditions as in your judgment makes it inadvisable to proceed with the offering, sale and delivery of the Firm Shares, or the Additional Shares, as the case may be, on the terms contemplated by the Prospectus. (c) Any notice of termination pursuant to this Section 11 shall be by telephone, telex, or telegraph, confirmed in writing by letter. (d) If this Agreement shall be terminated pursuant to any of the provisions hereof (otherwise than pursuant to (i) notification by you as provided in Section 11(a) hereof or (ii) Sections 9(b) or 11(b) hereof), or if the sale of the Shares provided for herein is not consummated because any condition to the obligations of the several Underwriters set forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company or any Selling Shareholder to perform any agreement herein or comply with any provision hereof, the Company and the Selling Shareholders will, jointly and severally, subject to demand by you, reimburse the Underwriters for all out-of-pocket expenses (including the fees and expenses of their counsel) incurred by the several Underwriters in connection herewith. 12. Notice. All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing and, if sent to any Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed in writing, to such Underwriter c/o Bear, Stearns & Co. Inc., 245 Park Avenue, New York, N.Y. 10167, Attention: Corporate Finance; if sent to the Company or any Selling Shareholder, shall be mailed, delivered, or telegraphed and confirmed in writing, to the Company, 40650 Encyclopedia Circle, Fremont, California 94538, Attention: David H. Edwab. 13. Parties. The Company and the Selling Shareholders shall be entitled to act and rely on any request, notice, consent, waiver or agreement purportedly given on behalf of the Underwriters when the same shall have been given by Bear, Stearns & Co. Inc. This Agreement shall inure solely to the benefit of, and shall be binding upon, the Underwriters, the Company and the Selling Shareholders and the controlling persons, directors, officers, employees and agents referred to in Sections 7 and 8, and their respective successors and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. The term "successors and assigns" shall not include a purchaser, in its capacity as such, of Shares from any of the Underwriters. 14. Construction. This Agreement shall be governed by, enforced under, and construed in accordance with the internal laws of the State of New York, without giving effect to the rules governing conflicts of laws. In this Agreement, (i) "including" means "including, without limitation," (ii) "person" means any individual or natural person and any entity or association of any kind, and (iii) "business day" means any day on which the Nasdaq National Market is open for trading. [THE IMMEDIATELY FOLLOWING PAGE IS THE SIGNATURE PAGE.] -31- 32 If the foregoing correctly sets forth the understanding among you, the Company, and the Selling Shareholders, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among us. Very truly yours, THE MEN'S WEARHOUSE, INC. By: ----------------------------- Name: ----------------------------- Title: ----------------------------- SELLING SHAREHOLDERS By: -------------------------------- David H. Edwab, Attorney-in-Fact for the Selling Shareholders named in Schedule II hereto -32- 33 Accepted as of the date first above written. BEAR, STEARNS & CO. INC. MORGAN STANLEY & CO. INCORPORATED PAINEWEBBER INCORPORATED ROBERTSON, STEPHENS & COMPANY LLC By: BEAR, STEARNS & CO. INC. By: ________________________ Its: ________________________ On behalf of itself and the other several Underwriters named in Schedule I hereto. -33- 34 SCHEDULE I
(1) (2) Number of Firm Shares Number of Firm Shares to Be Purchased to Be Purchased from the Name of Underwriter from the Company Selling Shareholders - ------------------- ------------------- ------------------------ Bear, Stearns & Co. Inc. Morgan Stanley & Co. Incorporated PaineWebber Incorporated Robertson, Stephens & Company LLC --------- --------- Totals 1,000,000 1,600,000 ========= =========
35 SCHEDULE II
Number of Firm Shares Name of Selling Shareholder to Be Sold - --------------------------- ---------- The George Zimmer 1988 Living Trust 325,000 Robert E. Zimmer 825,000 Richard E. Goldman 300,000 The James Edward Zimmer 1989 Living Trust 150,000 ------- Totals 1,600,000 =========
EX-5.1 3 OPINION OF FULBRIGHT & JAWORSKI L.L.P. 1 EXHIBIT 5.1 [FULBRIGHT & JAWORSKI L.L.P. LETTERHEAD] June 19, 1997 The Men's Wearhouse, Inc. 5803 Glenmont Drive Houston, Texas 77081 GENTLEMEN: We have acted as counsel for The Men's Wearhouse, Inc., a Texas corporation (the "Company"), in connection with the registration under the Securities Act of 1933 of up to 2,990,000 shares of the Company's common stock, $.01 par value (the "Shares"), to be offered upon the terms and subject to the conditions set forth in a proposed Underwriting Agreement to be entered into by and among the Company, Bear, Stearns & Co. Inc., Morgan Stanley & Co. Incorporated, PaineWebber Incorporated and Robertson, Stephens & Company, L.P., as representatives of the several underwriters to be listed therein, and the selling shareholders (the "Selling Shareholders") of the Company listed therein (the "Underwriting Agreement"). In connection therewith, we have examined the Company's Registration Statement on Form S-3 covering the Shares (the "Registration Statement") filed with the Securities and Exchange Commission, originals or copies certified or otherwise identified to our satisfaction of the Restated Articles of Incorporation of the Company, the amended By-laws of the Company, the corporate proceedings with respect to the offering of the Shares and such other documents and instruments as we have deemed necessary or appropriate for the expression of the opinions contained herein. We have assumed the authenticity and completeness of all records, certificates and other instruments submitted to us as originals, the conformity to original documents of all records, certificates and other instruments submitted to us as copies, the authenticity and completeness of the originals of those records, certificates and other instruments submitted to us as copies and the correctness of all statements of fact contained in all records, certificates and other instruments that we have examined. Based on the foregoing, and having regard for such legal considerations as we have deemed relevant, we are of the opinion that: (i) The 1,000,000 shares of Common Stock proposed to be offered by the Company have been duly and validly authorized for issuance and, when issued and paid for in accordance with the terms of the Underwriting Agreement, will be duly and validly issued, fully paid and nonassessable. (ii) The 1,990,000 shares of Common Stock proposed to be offered by the Selling Shareholders have been duly and validly authorized for issuance and are duly and validly issued, fully paid and nonassessable. The opinions expressed herein relate solely to, are based solely upon and are limited exclusively to the laws of the State of Texas and the federal laws of the United States of America, to the extent applicable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus included as part of the Registration Statement. Very truly yours, /s/ Fulbright & Jaworski L.L.P. Fulbright & Jaworski L.L.P. EX-23.2 4 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23.2 INDEPENDENT AUDITOR'S CONSENT We consent to the incorporation by reference in this Registration Statement of The Men's Wearhouse, Inc. on Form S-3 of our report dated March 5, 1997, included in the Annual Report on Form 10-K of The Men's Wearhouse, Inc. for the year ended February 1, 1997, and to the references to us under the headings "Selected Consolidated Financial Information" and "Experts" in this Registration Statement. /s/ DELOITTE & TOUCHE LLP Deloitte & Touche LLP Houston, Texas June 18, 1997 -----END PRIVACY-ENHANCED MESSAGE-----